TY - JOUR
T1 - The effect of wealth on individual and household labor supply
T2 - Evidence from Swedish lotteries
AU - Cesarini, David
AU - Lindqvist, Erik
AU - Notowidigdo, Matthew J.
AU - Östling, Robert
N1 - Funding Information:
The project is financially supported by three large grants from the Swedish Research Council (B0213903), Handelsbanken's Research Foundations (P2011:0032:1), and the Bank of Sweden Tercentenary Foundation (P15-0615:1). We also gratefully acknowledge financial support from the NBER Household Finance working group (22-2382-13-1-33-003), the NSF (1326635), and the Swedish Council for Working Life and Social Research (2011-1437).
Funding Information:
* Cesarini: Center for Experimental Social Science and Department of Economics, New York University, 19 W. 4th Street, 6FL, New York, NY 10012, NBER, and Research Institute of Industrial Economics (IFN) (email: david. cesarini@nyu.edu); Lindqvist: Department of Economics, Stockholm School of Economics, Box 6501, SE-113 83 Stockholm, Sweden, and IFN (email: erik.lindqvist@hhs.se); Notowidigdo: Northwestern University, 2001 Sheridan Road, Evanston, IL 60208, and NBER (email: noto@northwestern.edu); Östling: Institute for International Economic Studies, Stockholm University, SE-106 91 Stockholm, Sweden (email: robert.ostling@iies.su.se). This paper was accepted to the AER under the guidance of Hilary Hoynes, Coeditor. We thank André Chiappori, David Domeij, Trevor Gallen, John Eric Humphries, Erik Hurst, Edwin Leuven, Che-Yuan Liang, Jonna Olsson, Jesse Shapiro, John Shea, Johanna Wallenius, and seminar audiences at the AEA Annual Meeting, Bocconi, Chicago Booth, Cornell University, LSE, CREI-UPF, NBER Summer Institute, Northwestern University, the Rady School of Management, Stockholm University, and Uppsala University for helpful comments. We also thank Richard Foltyn, Victoria Gregory, My Hedlin, Renjie Jiang, Krisztian Kovacs, Odd Lyssarides, Svante Midander, and Erik Tengbjörk for excellent research assistance. This paper is part of a project hosted by IFN. We are grateful to IFN Director Magnus Henrekson for his strong commitment to the project and to Marta Benkestock for superb administrative assistance. The project is financially supported by three large grants from the Swedish Research Council (B0213903), Handelsbanken’s Research Foundations (P2011:0032:1), and the Bank of Sweden Tercentenary Foundation (P15-0615:1). We also gratefully acknowledge financial support from the NBER Household Finance working group (22-2382-13-1-33-003), the NSF (1326635), and the Swedish Council for Working Life and Social Research (2011-1437). The authors declare that they have no relevant or material financial interests that relate to the research described in this paper.
PY - 2017/12
Y1 - 2017/12
N2 - 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.
AB - 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.
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U2 - 10.1257/aer.20151589
DO - 10.1257/aer.20151589
M3 - Article
AN - SCOPUS:85038618921
SN - 0002-8282
VL - 107
SP - 3917
EP - 3946
JO - American Economic Review
JF - American Economic Review
IS - 12
ER -