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

Last registered on October 18, 2016
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Pre-Trial

Trial Information

General Information

Title
The Effect of Wealth on Individual and Household Labor Supply: Evidence from Swedish Lotteries
RCT ID
AEARCTR-0001458
Initial registration date
October 14, 2016

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
October 14, 2016, 9:20 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Last updated
October 18, 2016, 4:22 AM EDT

Last updated is the most recent time when changes to the trial's registration were published.

Locations

Country
Sweden
Region
Europe

Primary Investigator

Name
Matthew Notowidigdo
Affiliation
Northwestern University
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Other Primary Investigator(s)

PI Name
Erik Lindqvist
PI Affiliation
Stockholm School of Economics
Contact Investigator
PI Name
David Cesarini
PI Affiliation
New York University
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PI Name
Robert Östling
PI Affiliation
Stockholm University
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Additional Trial Information

Status
Completed
Start date
1986-01-01
End date
2010-12-31
Keywords
Labor
Additional Keywords
wealth, labor supply, lottery
JEL code(s)
J22
Secondary IDs
Abstract
We study the effect of wealth on individual and household labor supply using administrative data for a large sample of lottery players in Sweden. We find that winning a lump-sum lottery prize modestly reduces labor earnings, with pre-tax earnings declines over the first 10 years totaling roughly 10 percent of the prize. Earnings reductions are fairly constant over time and similar by age, gender, education, and pre-win earnings levels. We estimate a dynamic labor supply model and show that it can account for the results both over the life cycle and across the earnings distribution, and we use the estimated model to recover key labor supply elasticities. Lastly, we find larger earnings responses for winners than their spouses, regardless of the gender of the winner; this is inconsistent with unitary household labor supply models which pool exogenous unearned income within the household.
External Link(s)
J-PAL Evaluation Summary

Registration Citation

Citation
Cesarini, David et al. 2016. "The Effect of Wealth on Individual and Household Labor Supply: Evidence from Swedish Lotteries." AEA RCT Registry. October 18. https://doi.org/10.1257/rct.1458-4.0
Former Citation
Cesarini, David et al. 2016. "The Effect of Wealth on Individual and Household Labor Supply: Evidence from Swedish Lotteries." AEA RCT Registry. October 18. https://www.socialscienceregistry.org/trials/1458/history/11285
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Experimental Details

Interventions

Intervention(s)
Intervention (Hidden)
Intervention Start Date
1986-01-01
Intervention End Date
2010-12-31

Primary Outcomes

Primary Outcomes (end points)
Individual and household labor supply measured by earnings, hours worked and wages 0-10 years after winning the lottery.
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
In this paper, a large data set of lottery participants in Sweden was analyzed in a the framework of a randomized controlled experiment to study the effect of wealth on the labor earnings of individuals and households. Three separate samples of Swedish lottery players were used, which were matched to administrative data on labor earnings of lottery participants, labor earnings of their spouses, and a large number of socioeconomic and demographic variables. The first sample is a panel of around two million Swedish individuals who held "prize-linked savings" accounts in the 1980s and 1990s. These accounts incorporate a lottery element by randomly awarding prizes to some accounts rather than paying them interest. The second sample consisted of individuals who participated in a monthly Swedish subscription lottery called Kombilotteriet between 1998 and 2011. The third sample contained scratch lottery ticket winners who qualified for a televised draw at some point between 1994 and 2010 where they could win substantial amounts of money. These three samples were used to study the effects of shocks to wealth on individual and household labor supply.

The analysis and outcomes studied were not pre-registered.
Experimental Design Details
Randomization Method
Lottery
Randomization Unit
Individuals
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
Standard errors clustered by individual due to multiple wins. >100K clusters.
Sample size: planned number of observations
Around 250K.
Sample size (or number of clusters) by treatment arms
About 200K individuals PLS (prize-linked savings accounts), 25K for Kombi (monthly ticket-subscription lottery) and 3K for TRISS (scratch-ticket lottery).
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
Regional Ethical Review Board in Stockholm
IRB Approval Date
2010-11-23
IRB Approval Number
2010/1503-31/5
Analysis Plan

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
Yes
Intervention Completion Date
December 31, 2010, 12:00 +00:00
Data Collection Complete
Yes
Data Collection Completion Date
December 31, 2010, 12:00 +00:00
Final Sample Size: Number of Clusters (Unit of Randomization)
(same as in previous section)
Was attrition correlated with treatment status?
No
Final Sample Size: Total Number of Observations
(same as in previous section)
Final Sample Size (or Number of Clusters) by Treatment Arms
(same as in previous section)
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
No
Reports, Papers & Other Materials

Relevant Paper(s)

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.
Citation
Cesarini, David, Erik Lindqvist, Matthew J. Notowidigdo, Robert Östling, "The Effect of Wealth on Individual and Household Labor Supply: Evidence from Swedish Lotteries" NBER Working Paper No 21762, November 2015.
URL
http://www.nber.org/papers/w21762

Reports & Other Materials