We study the effect of wealth on labor supply using the randomized assignment of monetary prizes in a large sample of Swedish lottery players. We find winning a lottery prize modestly reduces labor earnings, with the reduction being immediate, persistent, and similar by age, education, and sex. A calibrated dynamic model of individual labor supply implies an average lifetime marginal propensity to earn out of unearned income of -0.11, 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.
Working Paper No. 1094
The Effect of Wealth on Individual and Household Labor Supply: Evidence from Swedish Lotteries
Working Paper
Reference
Cesarini, David, Erik Lindqvist, Matthew J. Notowidigdo and Robert Östling (2015). “The Effect of Wealth on Individual and Household Labor Supply: Evidence from Swedish Lotteries”. IFN Working Paper No. 1094. Stockholm: Research Institute of Industrial Economics (IFN).
Cesarini, David, Erik Lindqvist, Matthew J. Notowidigdo and Robert Östling (2015). “The Effect of Wealth on Individual and Household Labor Supply: Evidence from Swedish Lotteries”. IFN Working Paper No. 1094. Stockholm: Research Institute of Industrial Economics (IFN).
Authors
David Cesarini, Erik Lindqvist, Matthew J. Notowidigdo,
Robert Östling
