Labour Supply Responses to Financial Wealth Shocks: Evidence from in Italy
37 Pages Posted: 20 Mar 2019
Date Written: March 16, 2019
We look at how strongly shocks to wealth affect labour supply, using Italian data. We use asset price shocks to provide a measure of wealth changes that is exogenous to the household’s saving and labour supply. Results point to significant effects of wealth on: hours of work; whether agents leave their jobs; and, labour earnings. The magnitude of these effects can be substantial, for example for individuals who suffered larger wealth losses during the financial crisis. Responses are similar for men and women on average, but older working‐age individuals have relatively strong responses that drive the population results. Short‐run effects are somewhat persistent.
Keywords: Labour Supply, Financial wealth shocks, Wealth effects
JEL Classification: D15, J22
Suggested Citation: Suggested Citation