Stock Market Wealth and the Real Economy: A Local Labor Market Approach

Gabriel Chodorow-Reich, Plamen T. Nenov and Alp Simsek

American Economic Review, 2021, vol. 111, issue 5, 1613-57

Abstract: We provide evidence of the stock market consumption wealth effect by using a local labor market analysis. An increase in local stock wealth driven by aggregate stock prices increases local employment and payroll in nontradable industries and in total, with no effect on employment in tradable industries. In a model of geographic heterogeneity in stock wealth, these responses imply an MPC of 3.2 cents per year and that a 20 percent increase in stock valuations, unless countered by monetary policy, increases the aggregate labor bill by at least 1.7 percent and aggregate hours by at least 0.7 percent two years after the shock.

JEL-codes: E21 E24 E52 G12 G51 R22 R23 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (33)

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Related works:
Working Paper: Stock Market Wealth and the Real Economy: A Local Labor Market Approach (2019)
Working Paper: Stock Market Wealth and the Real Economy: A Local Labor Market Approach (2019)
Working Paper: Stock Market Wealth and the Real Economy: A Local Labor Market Approach (2019)
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DOI: 10.1257/aer.20200208

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