Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 1094: The Effect of Wealth on Individual and Household Labor Supply: Evidence from Swedish Lotteries

David Cesarini (), Erik Lindqvist (), Matthew J. Notowidigdo () and Robert Östling ()
Additional contact information
David Cesarini: New York University, Postal: and Research Institute of Industrial Economics (IFN), Stockholm, Sweden
Erik Lindqvist: Stockholm School of Economics, Postal: NBER,and Research Institute of Industrial Economics (IFN), Stockholm, Sweden
Matthew J. Notowidigdo: Northwestern University, Postal: and NBER
Robert Östling: Institute for Interntional Economic Studies (IIES), Postal: Stockholm University

Abstract: 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.

Keywords: Labor supply; household labor supply; income effect; marginal propensity to earn; substitution effect; uncompensated elasticity; compensated elasticity; Frisch elasticity; household bargaining; unitary model of the household; self-employment; taxation

JEL-codes: H20; J12; J22; J24; J26; J62

41 pages, November 23, 2015

Full text files

wp1094.pdf PDF-file 
wp1094_Online_Appendix%202015%2011%2019_complete.pdf PDF-file Online Appendix

Download statistics

Questions (including download problems) about the papers in this series should be directed to Elisabeth Gustafsson ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-01-23 23:34:49.