NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

David Cesarini

Department of Economics
New York University
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New York, NY 10012
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NBER Program Affiliations: AG
NBER Affiliation: Faculty Research Fellow

NBER Working Papers and Publications

November 2015The Effect of Wealth on Individual and Household Labor Supply: Evidence from Swedish Lotteries
with Erik Lindqvist, Matthew J. Notowidigdo, Robert Östling: w21762
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.
October 2015Windfall Gains and Stock Market Participation
with Joseph S. Briggs, Erik Lindqvist, Robert Östling: w21673
We estimate the causal effect of wealth on stock market participation using administrative data on Swedish lottery players. A $150,000 windfall gain increases stock ownership probability among pre-lottery non-participants by 12 percentage points, while pre-lottery stock holders are unaffected. The effect is immediate, seemingly permanent and heterogeneous in intuitive ways. Standard lifecycle models predict wealth effects far too large to match our causal estimates under common calibrations. Additional analyses suggest a limited role for explanations such as procrastination or real-estate investment. Overall, results suggest that “nonstandard” beliefs or preferences contribute to the nonparticipation of households across many demographic groups.
 
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