2017

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

Reprint No. 2017:67

Author(s): David Cesarini, Erik Lindqvist, Matthew J. Notowidigdo and Robert ÖstlingYear: 2017 Title: American Economic Review Volume (No.): 107 (12) Pages: 3917–3946
Online article (restrictions may apply)
Preliminary version


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.


Reference:
Cesarini, David, Erik Lindqvist, Matthew J. Notowidigdo and Robert Östling (2017), "The Effect of Wealth on Individual and Household Labor Supply: Evidence from Swedish Lotteries". American Economic Review 107(12), 3917–3946.

Interdisciplinary European Studies

The European Union in a Changing World Order

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This book explores how the European Union responds to the ongoing challenges to the liberal international order. These challenges arise both within the EU itself and beyond its borders, and put into question the values of free trade and liberal democracy. 

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