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Do Windfall Gains Affect Labour Supply? Evidence from the European Household Panel

Urban Sila and Ricardo Sousa ()

No 20/2011, NIPE Working Papers from NIPE - Universidade do Minho

Abstract: We investigate whether workers adjust hours worked in response to windfall gains using data from the European Household Panel. The results suggest that unexpected variation in income has a negative (although small) effect on working hours. In particular, after receiving an unanticipated windfall gain, individuals are more likely to drop out of the labour force and the effects become larger as the size of windfall increases. Furthermore, the empirical findings show that the impact of windfall gains on labour supply: (i) is more important for young and old individuals, (ii) is mostly negative for married individuals with young children, (iii) but can be positive for single individuals at the age of around 40 years.

Keywords: windfall gains; working hours (search for similar items in EconPapers)
JEL-codes: E37 E62 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-eur, nep-lab and nep-lma
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