Matthew Notowidigdo

Associate Professor of Economics


An applied microeconomist, Matthew Notowidigdo studies a broad set of topics in labor and health economics using a variety of empirical approaches. In labor economics, his research has focused on understanding the causes and consequences of unemployment duration dependence (state dependence in unemployment), the incidence of local labor demand shocks, and the economic effects of unemployment insurance over the business cycle. One theme across all of these topics is using variation in local labor market conditions to inform economic theories and learn new facts about the labor market. Notowidigdo’s research in health economics focuses on the effects of public health insurance on labor supply, the effects of health on the marginal utility of consumption, and the effects of income on health spending. An important motivation for this line of research is to inform the design of public health insurance programs. With the recent passage of the U.S. Affordable Care Act, Notowidigdo sees this as an important topic for future research. 

Notowidigdo is a co-editor at the American Economic Journal: Economic Policy, an associate editor at the Quarterly Journal of Economics, and a faculty research fellow at the National Bureau of Economics Research (NBER). His co-authored paper that was published in the Journal of the European Economic Association, “What Good is Wealth without Health? The Effect of Health on the Marginal Utility of Consumption," won the association's 2014 Hicks-Tinbergen Medal, awarded to the most outstanding article published in the last two years. Before coming to Northwestern, Notowidigdo was the Neubauer Family Assistant Professor of Economics at the University of Chicago Booth School of Business.

Current Research

The Effect of Wealth on Individual and Household Labor Supply. With David Cesarini of New York University, Erik Lindqvist of the Stockholm School of Economics, and Robert Östling of Stockholm University, Notowidigdo estimates the effect of wealth on individual and household labor earnings using a large, newly collected sample of lottery players in Sweden. A one-year National Science Foundation grant enabled the researchers to combine their sample of 2.5 million lottery players with rich administrative data. Their preliminary results indicate that winning a lottery prize modestly reduces labor earnings, with the effects roughly constant over time and persisting more than 10 years. They find both intensive and extensive margin responses and similar responses by age, gender, and education. Interestingly, they find significantly larger declines in labor earnings for winners than for their spouses, regardless of the gender of the winner. This is inconsistent with the pooling of exogenous unearned income within the household, which is a necessary condition of unitary models of household labor supply.

Hospitals as Insurers of Last Resort. With Craig Garthwaite of Northwestern University Kellogg School of Management and Tal Gross of Columbia University Mailman School of Public, Notowidigdo uses previously confidential hospital financial data to study hospital uncompensated care, medical care for which no payment is received.  The researchers find that each additional uninsured person costs local hospitals about $900 per year.  Additionally, when a local hospital closes, the uncompensated care costs of nearby hospitals increases.  The researchers also show that hospital profits are reduced when the uninsured population increases, suggesting that hospitals do not pass along the increased costs of serving uninsured patients to other parties.  As a result of these findings, the researchers conclude that hospitals serve a unique role in the social insurance system in the U.S. as “insurers of last resort.”

Selected Publications

Gross, T., M. Notowidigdo, and J. Wang. 2014. Liquidity constraints and consumer bankruptcy: Evidence from tax rebatesReview of Economics and Statistics 96(3): 431–43.

Garthwaite, C., T. Gross, and M. Notowidigdo. 2014. Public health insurance, labor supply, and employment lockQuarterly Journal of Economics 129(2): 653–96.

Acemoglu, D., A. Finkelstein, and M. Notowidigdo. 2013. Income and health spending: Evidence from oil price shocksReview of Economics and Statistics 95(4): 1079–95.

Kroft, K., F. Lange, and M. Notowidigdo. 2013. Duration dependence and labor market conditions: Evidence from a field experimentQuarterly Journal of Economics 128(3): 1123–67.

Finkelstein, A., E. Luttmer, and M. Notowidigdo. 2013. What good is wealth without health? The effect of health on the marginal utility of consumptionJournal of the European Economic Association 11:221–58.