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

Last registered on October 14, 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.

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
Contact Investigator
PI Name
Robert Östling
PI Affiliation
Institute for International Economic Studies
Contact Investigator

Additional Trial Information

Status
Completed
Start date
1994-01-01
End date
2010-12-31
Keywords
Labor
Additional Keywords
wealth, labor supply, lottery
JEL code(s)
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 much 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 14. https://doi.org/10.1257/rct.1458-1.0
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 14. https://www.socialscienceregistry.org/trials/1458/history/11192
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Experimental Details

Interventions

Intervention(s)
Intervention Start Date
1994-01-01
Intervention End Date
2010-12-31

Primary Outcomes

Primary Outcomes (end points)
Lottery Prizes and Individual-Level Labor Earnings: Short-Run and Medium-Run Results

Lottery Prizes and Individual-Level Labor Earnings: Short-Run and Medium-Run Results

Lottery Prizes and Individual-Level Labor Earnings: Heterogeneity by Type of Lottery

Lottery Prizes and Individual-Level Labor Earnings: Alternative Specifications Investigating Nonlinear Responses

Lottery Prizes and Individual-Level Labor Earnings: Heterogeneity by Age, Gender, and Level of Education

Lottery Prizes and Individual-Level Labor Earnings: Heterogeneity by Pre-Win Earnings Levels

Lottery Prizes and Individual-Level Labor Earnings: Changing Employers, Occupation, Industry, and Into Self-Employment

Simulation-Based Estimates of Model Parameters

- Consumption Weight in Utility

- Annual Discount Rate

- Hours Constraint

Implied Labor Supply Elasticities from Calibrated Model

- Effect of lottery prize on total labor earnings over
remaining working life [Implied Lifetime Wealth Effect]

- Effect of permanent change in wages on total hours
worked [Uncompensated (Marshallian) Labor Supply Elasticity]

- Effect of transitory change in wages on hours worked
[Intertemporal Frisch Elasticity]

- Implied Compensated (Hicksian) Labor Supply Elasticity
(from (1) and (2) through Slutsky equation)

- Implied Lifetime Wealth Effects at Various Ages

The Effect of Wealth on Household Labor Earnings

The Effect of Wealth on Household Labor Earnings: Testing for Gender Differences






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, comprising roughly two million individuals in total, 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 final 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 long-run effects of shocks to wealth, and to estimate heterogenous wealth effects across a wide range of demographic characteristics.
Experimental Design Details
Randomization Method
(varies for each sample, see "Experimental Design" for information on how wealth was randomly assigned in each sample)
Randomization Unit
individuals
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
(no clusters)
Sample size: planned number of observations
around 2 million individuals total
Sample size (or number of clusters) by treatment arms
222,223 individuals PLS (prize-linked savings accounts)

25,427 individuals Kombi (monthly ticket-subscription lottery)

3,267 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
IRB Approval Date
IRB Approval Number
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 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 much 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.
Citation
Cesarini, David, Erik Lindqvist, Matthew J. Notowidigdo, Robert Ostling, "The Effect of Wealth on Individual and Household Labor Supply: Evidence from Swedish Lotteries," Northwestern Working Paper Econ 341/343, May 2015.
URL
https://www.povertyactionlab.org/sites/default/files/publications/Wealth%20on%20Household%20Labor%20Supply%202015_0.pdf

Reports & Other Materials