Rachel Knott, Monash University - Labour Supply Responses to a Large Wealth Shock

Title: Labour Supply Responses to a Large Wealth Shock
(David Johnston, Rachel Knott and Benno Torgler)

Abstract: We explore the labour supply responses to a large wealth shock caused by the 2011 Brisbane floods. Geo-coded flood data are matched to house-price data and individual-level records from the Census and the Australian Tax Office, and used to estimate the differences in outcomes between flood-affected areas and neighbouring non-affected areas. The flood is estimated to have reduced house prices by 9% over the four years post-flood, representing a significant wealth shock to flood-affected areas. This leads to a significant increase in labour supply at the extensive and intensive margins among women close to retirement age (55-65 years old), but not among similarly aged men. Effects are largest amongst homeowners, single women, and those living in disadvantaged areas, and persist for four years post-flood. We find no labour supply impacts on younger men or women, probably because they have more working years to recover their lost wealth.

Presenter: Rachel Knott, Monash University

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