NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Effect of Wealth on Individual and Household Labor Supply: Evidence from Swedish Lotteries

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

NBER Working Paper No. 21762
Issued in November 2015
NBER Program(s):LS

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.

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Document Object Identifier (DOI): 10.3386/w21762

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