Labor supply response to windfall gains

Dimitris Georgarakos, Tullio Jappelli (), Geoff Kenny and Luigi Pistaferri

No 3154, Working Paper Series from European Central Bank

Abstract: Using a large survey of euro area consumers, we conduct an experiment in which respondents report how they would adjust their labor market participation, hours worked, and job search effort (if not employed) in response to randomly assigned windfall gain scenarios. Windfall gains reduce labor supply, but only when the gains are substantial. At the extensive margin, gains of €25,000 or less have no effects, while gains between €50,000 and €100,000 reduce the probability of working by 1.5 to 3.5 percentage points. At the intensive margin, small gains produce no impact, while gains above €50,000 lead to a reduction of approximately one hour of work per week. The effects among women and workers near retirement are stronger. The share of non-employed respondents who stop or reduce job search intensity declines by 1 percentage point for each €10,000 in windfall gain, with the strongest effects observed among older individuals receiving €100,000. JEL Classification: E24, D10, J22, J68

Keywords: consumer expectations survey; job search; labor supply; survey experiment; wealth shocks (search for similar items in EconPapers)
Date: 2025-11
New Economics Papers: this item is included in nep-age, nep-eec, nep-exp, nep-inv and nep-lab
Note: 483508
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Labor supply response to windfall gains (2025)
Working Paper: Labor Supply Response to Windfall Gains (2024)
Working Paper: Labor Supply Response to Windfall Gains (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20253154

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