Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/179366 
Authors: 
Year of Publication: 
2018
Series/Report no.: 
Working Paper Series No. 18-03
Publisher: 
University of Mannheim, Department of Economics, Mannheim
Abstract: 
In the United States, the employment rate is nearly flat across wealth quintiles with the exception of the first quintile. Correlations between wealth and employment are close to zero or moderately positive. However, incomplete markets models with a standard utility function counterfactually generate a strongly negative relationship between wealth and employment. Using a fairly standard incomplete markets model calibrated to match the distribution of wealth, I find that government transfers and capital income taxation increase the (non-targeted) correlations between wealth and employment substantially, bringing the model closer to the data. As the model's fit with the distribution of wealth and employment improves, I find that the precautionary motive of labor supply is mitigated, thereby raising aggregate labor supply elasticities substantially.
Subjects: 
Wealth distribution
employment
government transfers
capital income taxation
aggregate labor supply elasticity
JEL: 
E24
E21
J22
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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