Working Paper: NBER ID: w21762
Authors: David Cesarini; Erik Lindqvist; Matthew J Notowidigdo; Robert Ståhl
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; Wealth Effects; Lottery; Household Economics
JEL Codes: J22; J26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Winning a lottery prize (H27) | Reduction in labor earnings (J39) |
| Winning a lottery prize (H27) | Decrease in hours worked (J22) |
| Reduction in labor earnings (J39) | Decrease in hours worked (J22) |
| Winning a lottery prize (H27) | Changes in labor supply adjustments (J29) |
| Lottery winnings (H27) | Observed changes in labor supply (J20) |