Skewed Idiosyncratic Income Risk over the Business Cycle: Sources and Insurance

Christopher Busch*, David Domeij, Fatih Guvenen, Rocio Madera

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

8 Citations (Scopus)

Abstract

We provide new evidence on business cycle fluctuations in skewed labor income risk in the United States, Germany, Sweden, and France. We document four results. First, in all countries, the skewness of individual income growth is strongly procyclical, whereas its variance is flat and acyclical. Second, this result also holds for continuously employed, full-time workers, indicating that the hours margin is not the main driver; additional analyses of hours and wages confirm that both margins are important. Third, within-house-hold smoothing does not seem effective at mitigating skewness fluctuations. Fourth, tax-and-transfer policies blunt some of the largest declines in incomes, reducing procyclical fluctuations in skewness.

Original languageEnglish
Pages (from-to)207-242
Number of pages36
JournalAmerican Economic Journal: Macroeconomics
Volume14
Issue number2
DOIs
Publication statusPublished - 2022

Fingerprint

Dive into the research topics of 'Skewed Idiosyncratic Income Risk over the Business Cycle: Sources and Insurance'. Together they form a unique fingerprint.

Cite this