The Effect of Wealth on Individual and Household Labor Supply: Evidence from Swedish Lotteries
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. (JEL D14, J22, J31)
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In the case of student loan forgiveness, the precise value of the shock to lifetime wealth is known, allowing the approach of annuitizing the forgiveness over the remaining lifetime.
“In the case of student loan forgiveness, we know the precise value of the shock to lifetime wealth, allowing us to follow the approach taken in the literature on lottery windfalls annuitizing the forgiveness over the remaining lifetime”
From Student Loan Forgiveness (2025) · cites this paper as Cesarini et al., 2017
The Model Setup (p. 19) treats a lottery prize as a known, one-time wealth shock, and the lifetime analysis (p. 23) projects its effects over the winner’s remaining years of life. These passages support using a lifetime framework, but they do not describe annuitizing the prize value over those years; the paper does not address student-loan forgiveness. (LLM, conf=0.83)
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References 57 · Cited by 285
- Authors
- Cesarini, D., Lindqvist, E., Notowidigdo, M. J., & Östling, R.
- Affiliations
- National Bureau of Economic Research (US)
- Stockholm School of Economics (SE)
- Northwestern University (US)
- Stockholm University (SE)
- Venue
- American Economic Review
- Publisher
- American Economic Association
- Published
- 2017-12-01
- Volume
- 107
- Issue
- 12
- Pages
- 3917-3946
- ISSN
- 0002-8282 (ISSN-L)
- OpenAlex
- W2186434883
- Cited by
- 285
- References
- 57
- Citations by year
- 2026: 26 · 2025: 37 · 2024: 36 · 2023: 37 · 2022: 33 · 2021: 37 · 2020: 23 · 2019: 18 · 2018: 24 · 2017: 4 · 2016: 8 · 2014: 1
- FWCI
- 39.33
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- American Economic Review (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Econstor (Econstor) (submittedVersion)
- Topics
- Social Sciences › Gender Studies › Gender, Labor, and Family Dynamics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Labor market dynamics and wage inequality
- Social Sciences › Business, Management and Accounting › Accounting › Financial Literacy, Pension, Retirement Analysis
- Keywords
- wealth, labor supply, lottery winners, earnings response, household labor supply, unitary household model, spousal earnings, unearned income
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