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

Principal Investigator(s): View help for Principal Investigator(s) Christopher Busch, Universitat Autonoma de Barcelona, MOVE, Barcelona GSE; David Domeij, Stockholm School of Economics; Fatih Guvenen, University of Minnesota, Minneapolis Fed, NBER; Rocio Madera, Southern Methodist University

Version: View help for Version V1

Name	File Type	Size	Last Modified
AEJM_CODE			08/25/2021 03:05:PM

Project Citation:

Busch, Christopher, Domeij, David, Guvenen, Fatih, and Madera, Rocio. Data and Code for: Skewed Idiosyncratic Income Risk over the Business Cycle: Sources and Insurance. Nashville, TN: American Economic Association [publisher], 2022. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2022-03-25. https://doi.org/10.3886/E120905V1

Project Description

Summary: Recent studies have shown that idiosyncratic labor income risk becomes more left-skewed during recessions. This procyclical skewness arises from a combination of higher downside risk and lower chances of upward surprises during recessions. While this much is known, some important open questions remain. For example, how robust are these patterns across countries that differ in their institutions and policies, as well as across genders, education groups, and occupations, among others? What is the contribution of wages versus hours to procyclical skewness of earnings changes? To what extent can skewness fluctuations in individual earnings be smoothed within households or with government policies? Using panel data from the United States, Germany, Sweden, and France, we find four main results. First, the skewness of individual income growth (before-tax/transfer) is procyclical while its variance is flat and acyclical in all three countries. Second, this result holds even for full-time workers continuously employed in the same establishment, indicating that the hours margin is not the main driver; additional analyses of hours and wages confirm that both margins are important. Third, within-household 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.

Scope of Project

Subject Terms: Idiosyncratic income risk; business cycles ; countercyclical risk; social insurance policy. ; procyclical skewness

JEL Classification:
      D31 Personal Income, Wealth, and Their Distributions
      E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
      E32 Business Fluctuations; Cycles
      H31 Fiscal Policies and Behavior of Economic Agents: Household

Geographic Coverage: Germany, Sweden, United States, France

Time Period(s): 1976 – 2010 (United States - PSID); 1984 – 2011 (Germany - SOEP); 1976 – 2010 (Germany - SIAB); 1979 – 2010 (Sweden); 1995 – 2015 (France)

Universe: For each country, we consider three samples:

Working-age (25-59) males
Working-age females
Households with two adults and working-age household head

Data Type(s): administrative records data; aggregate data; survey data

Methodology

Data Source:

Panel Study of Income Dynamics, United States
Sample of Integrated Labour Market Biographies, Germany
German Socio-Economic Panel, Germany
Longitudinal Individual Data Base, Sweden
Longitudinalintegrated database for health insurance and labour market studies, Sweden
Declaration Annuelle des Donnees Sociales, France

Unit(s) of Observation: households, individuals

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Published Versions

V1 [2022-03-25]

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