Gender-Invariant Labor Supply Response to Unearned Income
Observational StudyReview
Observational studies frequently find that women alter their labor supply more significantly than men in response to household income changes. Identifying whether this difference reflects distinct leisure preferences or confounding factors like endogenous spousal income requires evaluating exogenous financial transfers across genders.
Picture this
Imagine a male worker and a female worker who each receive an identical surprise annual cash gift. Even if they started with different working hours or baseline earnings, both workers reduce their employment earnings by the exact same proportion, showing that their underlying choice between work and free time responds identically to unearned wealth.
What the evidence says
The gender interaction term coefficient with yearly prize is +0.002 (standard error 0.057), demonstrating no statistically significant difference in marginal propensity to earn between men (baseline MPE of -0.124) and women (MPE of -0.122).
- Who was studied
- N = 194 human Massachusetts Megabucks lottery winners receiving $100,000 or less annually (from a basic sample of N = 496 respondents; 63% male, 37% female; baseline working rate 75% for men earning $26,700 vs 65% for women earning $15,400).
- How
- Multivariate interaction-effects OLS panel regression of 6-year post-lottery Social Security Administration earnings on yearly lottery winnings crossed with a female gender indicator, controlling for pre-lottery baseline characteristics.
What to do
1. Apply identical labor supply reduction coefficients across male and female populations when modeling non-wage income transfers or universal basic income policies.
From the source
"More surprisingly, we find no significant differences between men and women in terms of the marginal propensity to earn out of unearned income. All estimates of the differences are extremely close to zero, with some negative and some positive estimates, and none is significant for the average of post-lottery years or for any of the post-lottery years separately."
Estimating_the_Effect_of_Unearned_Income_on_Labor_Earnings,_Savings.pdf