Institutional Affiliation: University of Toronto
|What Do Data on Millions of U.S. Workers Reveal about Life-Cycle Earnings Risk?|
with , , : w20913
We study the evolution of individual labor earnings over the life cycle using a large panel data set of earnings histories drawn from U.S. administrative records. Using fully nonparametric methods, our analysis reaches two broad conclusions. First, earnings shocks display substantial deviations from lognormality---the standard assumption in the incomplete markets literature. In particular, earnings shocks display strong negative skewness and extremely high kurtosis---as high as 30 compared with 3 for a Gaussian distribution. The high kurtosis implies that in a given year, most individuals experience very small earnings shocks, and a small but non-negligible number experience very large shocks. Second, these statistical properties vary significantly both over the life cycle and with the ear...
|The Nature of Countercyclical Income Risk|
with , : w18035
This paper studies the cyclical nature of individual income risk using a confidential dataset from the U.S. Social Security Administration, which contains (uncapped) earnings histories for millions of individuals. The base sample is a nationally representative panel containing 10 percent of all U.S. males from 1978 to 2010. We use these data to decompose individual income growth during recessions into "between-group" and "within-group" components. We begin with the behavior of within-group shocks. Contrary to past research, we do not find the variance of idiosyncratic income shocks to be countercyclical. Instead, it is the left-skewness of shocks that is strongly countercyclical. That is, during recessions, the upper end of the shock distribution collapses--large upward income movements be...
Published: The Nature of Countercyclical Income Risk (with S. Ozkan and J. Song), Journal of Political Economy, 2014, Vol. 122, No. 3, pp. 621-660. citation courtesy of
|Taxation of Human Capital and Wage Inequality: A Cross-Country Analysis|
with , : w15526
Wage inequality has been significantly higher in the United States than in continental European countries (CEU) since the 1970s. Moreover, this inequality gap has further widened during this period as the US has experienced a large increase in wage inequality, whereas the CEU has seen only modest changes. This paper studies the role of labor income tax policies for understanding these facts, focusing on male workers. We construct a life cycle model in which individuals decide each period whether to go to school, work, or stay non-employed. Individuals can accumulate skills either in school or while working. Wage inequality arises from differences across individuals in their ability to learn new skills as well as from idiosyncratic shocks. Progressive taxation compresses the (after-tax) wag...
Published: “Taxation of Human Capital and Wage Inequality: A Cross-Country Analysis” PAPER (with Burhanettin Kuruscu and Serdar Ozkan. Review of Economic Studies, 2014, Vol 81, pp. 818-850. citation courtesy of