The effect of wealth on individual and household labor supply: Evidence from Swedish lotteries

David Cesarini, Erik Lindqvist, Matthew J. Notowidigdo, Robert Östling

    Research output: Contribution to journalArticle

    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. 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.

    Original languageEnglish (US)
    Pages (from-to)3917-3946
    Number of pages30
    JournalAmerican Economic Review
    Volume107
    Issue number12
    DOIs
    StatePublished - Dec 2017

    ASJC Scopus subject areas

    • Economics and Econometrics

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