4.4. Wealth shocks and transitions
In the model presented above, changing levels of wealth may influence job-to-job transitions as well as transitions to non-participation (to have a baby, to care for family members, to move house or to take up full-time education). In our estimations presented in Section (6), we thus include both of these (potentially) voluntary transitions in our analysis of job leaving. A robustness check revealed that including clearly involuntary job separations does not significantly modify results. Section (5) presents evidence of wealth effects on job preferences based on job-to-job transitions for which we can contrast job characteristics before and after the move.
Descriptive evidence of the impact of wealth shocks on job leaving rates is presented in Fig. (1), which gives the smoothed hazard rate out of the first 100 months of employment by receipt of a significant windfall (defined as a windfall greater than £2000) and by job satisfaction (high job satisfaction defined as jobs with which workers are
“nearly completely” or “completely” satisfied). Quit rates are highest for the group of windfall recipients with low levels of job satisfaction and lowest (over most of the job duration) for windfall recipients with high job satisfaction. This suggests that labour supply effects of wealth may depend importantly on non-wage characteristics and provides a starting point for an answer to our research question: do changes in wealth influence the demand for more satisfying jobs? In Section (5)
we first consider the subset of transitions that are followed by another job observed in the data. We compare the jobs individuals move from to those they move to, and hence need not worry about differences in characteristics across individuals. We then consider all voluntary job leaving in Section (6). Since this requires comparisons across different
individuals, this section controls for observable and unobservable differences across individuals using the techniques outlined in Section (3).