Gabriel Chodorow-Reich, Plamen Nenov, and Alp Simsek: Stock Market Wealth and the Real Economy: A Local Labor Market Approach https://scholar.harvard.edu/chodorow-reich/publications/stock-market-wealth-and-real-economy-local-labor-market-approach: "We provide evidence on the stock market consumption wealth effect by using a local labor market analysis and regional heterogeneity in stock market wealth. An increase in stock wealth increases local employment and payroll in nontradable industries and in total, while having no effect on employment in tradable industries. In a model with consumption wealth effects and geographic heterogeneity, these responses imply a marginal propensity to consume out of a dollar of stock wealth of 2.8 cents per year. We also use the model to quantify the aggregate effects of a stock market wealth shock when monetary policy is passive. A 20% increase in stock valuations, unless countered by monetary policy, increases the aggregate labor bill by at least 0.85% and aggregate hours by at least 0.28% two years after the shock...
Confounders * Leading indicators channel * Cost of capital channel
County data: * Effects in nontradables but not tradables employment... * 2.8% one-year MPC out of W * 20% uncountered stock return raises hours worked by 0.28%
Estimating choices: * "uncountered" means keeping the time path of the nominal interest rate fixed... * Regional aggregation