IFS Working Paper (W17/29)

Labour supply responses to financial wealth shocks: evidence from Italy

Date: 22 December 2017
Publisher: The IFS
DOI: 10.1920/wp.ifs.2017.W1729

We look at how strongly shocks to asset values affect labour supply, using Italian data. We use asset price shocks to provide a measure of wealth changes that is exogenous to households’ saving and labour supply. Our results point to significant effects of wealth on hours of work and on whether or not agents leave their jobs. The magnitude of these effects can be substantial, for example for those individuals who suffered larger wealth losses during the financial crisis. Family effects reflect similar responses from men and women on average. Older working-age individuals drive the population results.