Stock Market Wealth and Worker Output

Abstract: This paper uses individual-level data linking stock investments to work performance to examine how changes in stock market wealth affect worker output. Exploiting large return variations over time and across investors, we document a 10% increase in monthly stock investment returns is associated with a decrease of 3.9% in the same investor’s next-month work output. The negative output response is not driven by concurrent economic conditions, pronounced when focusing on more idiosyncratic stock investment returns, and moreover is unexplained by investor-specific liquidity needs. Consistent with the wealth-effect interpretation, the effect is stronger for higher-income workers. In the negative-return domain, interestingly, a decline in stock investment returns is followed by lower output, especially for male, younger, less educated, and lower-income workers. Overall, our results highlight a novel channel of transmitting stock market fluctuation to the real economy through labor supply.

Link to the seminar:

Zoom Meeting:

https://eur-nl.zoom.us/j/95036227967?pwd=UlQxejQyeG1QaTk3WEFhNnBkc0kzdz09

Meeting ID: 950 3622 7967

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