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Labour supply responses to financial wealth shocks: evidence from Italy

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  • Renata Bottazzi
  • Serena Trucchi
  • Matthew Wakefield

Abstract

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.

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  • Renata Bottazzi & Serena Trucchi & Matthew Wakefield, 2021. "Labour supply responses to financial wealth shocks: evidence from Italy," Fiscal Studies, John Wiley & Sons, vol. 42(2), pages 291-317, June.
    • Handle: RePEc:wly:fistud:v:42:y:2021:i:2:p:291-317
    DOI: 10.1111/1475-5890.12254
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    Cited by:

    1. Renata Bottazzi & Serena Trucchi & Matthew Wakefield, 2021. "Labour supply responses to financial wealth shocks: evidence from Italy," Fiscal Studies, John Wiley & Sons, vol. 42(2), pages 291-317, June.
    2. Dimitris Georgarakos & Tullio Jappelli & Geoff Kenny & Luigi Pistaferri, 2023. "Labor Supply Response to Windfall Gains," CSEF Working Papers 682, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    3. Anil Kumar & Che-Yuan Liang, 2018. "Labor Market Effects of Credit Constraints: Evidence from a Natural Experiment," Working Papers 1810, Federal Reserve Bank of Dallas, revised 04 Feb 2023.

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    More about this item

    JEL classification:

    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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