The Effect of Wealth on Individual and Household Labor Supply: Evidence from Swedish Lotteries

David Cesarini, Erik Lindqvist, Matthew Notowidigdo and Robert Östling ()
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Robert Östling: Institute for Interntional Economic Studies (IIES), Postal: Stockholm University

No 1094, Working Paper Series from Research Institute of Industrial Economics

Abstract: We study the effect of wealth on labor supply using the randomized assignment of monetary prizes in a large sample of Swedish lottery players. We find winning a lottery prize modestly reduces labor earnings, with the reduction being immediate, persistent, and similar by age, education, and sex. A calibrated dynamic model of individual labor supply implies an average lifetime marginal propensity to earn out of unearned income of -0.11, and labor-supply elasticities in the lower range of previously reported estimates. The earnings response is stronger for winners than their spouses, which is inconsistent with unitary household labor supply models.

Keywords: Labor supply; household labor supply; income effect; marginal propensity to earn; substitution effect; uncompensated elasticity; compensated elasticity; Frisch elasticity; household bargaining; unitary model of the household; self-employment; taxation (search for similar items in EconPapers)
JEL-codes: H20 J12 J22 J24 J26 J62 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2015-11-23
New Economics Papers: this item is included in nep-exp, nep-lma, nep-ltv and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (42)

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Related works:
Journal Article: The Effect of Wealth on Individual and Household Labor Supply: Evidence from Swedish Lotteries (2017)
Working Paper: The Effect of Wealth on Individual and Household Labor Supply: Evidence from Swedish Lotteries (2015)
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