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

David Cesarini (), Erik Lindqvist (), Matthew Notowidigdo and Robert Östling ()

American Economic Review, 2017, vol. 107, issue 12, 3917-46

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. Winning a lottery prize modestly reduces earnings, with the reduction being immediate, persistent, and quite similar by age, education, and sex. A calibrated dynamic model implies lifetime marginal propensities to earn out of unearned income from -0.17 at age 20 to -0.04 at age 60, 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.

JEL-codes: D14 J22 J31 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/aer.20151589
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Working Paper: The Effect of Wealth on Individual and Household Labor Supply: Evidence from Swedish Lotteries (2015) Downloads
Working Paper: The Effect of Wealth on Individual and Household Labor Supply: Evidence from Swedish Lotteries (2015) Downloads
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