Family and Government Insurance: Wage, Earnings, and Income Risks in the Netherlands and the U.S

Mariacristina De Nardi and Giulio Fella

No 42, Opportunity and Inclusive Growth Institute Working Papers from Federal Reserve Bank of Minneapolis

Abstract: We document new facts about risk in male wages and earnings, household earnings, and pre- and post-tax income in the Netherlands and the United States. We find that, in both countries, earnings display important deviations from the typical assumptions of linearity and normality. Individual-level male wage and earnings risk is relatively high at the beginning and end of the working life, and for those in the lower and upper parts of the income distribution. Hours are the main driver of the negative skewness and, to a lesser extent, the high kurtosis of earnings changes. Even though we find no evidence of added-worker effects, the presence of spousal earnings reduces the variability of household income compared to that of male earnings. In the Netherlands, government transfers are a major source of insurance, substantially reducing the standard deviation, negative skewness, and kurtosis of income changes. In the U.S. the role of family insurance is much larger than in the Netherlands. Family and government insurance reduce, but do not eliminate nonlinearities in household disposable income by age and previous earnings in either country.

Keywords: Self-insurance; Wage risk; Social insurance; Life cycle; Progressive taxation; Redistribution (search for similar items in EconPapers)
JEL-codes: D31 E24 H31 J31 (search for similar items in EconPapers)
Pages: 57
Date: 2020-10-26
New Economics Papers: this item is included in nep-dem, nep-ias, nep-lma, nep-mac and nep-pbe
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Related works:
Journal Article: Family and government insurance: Wage, earnings, and income risks in the Netherlands and the U.S (2021)
Working Paper: Family and Government Insurance: Wage, Earnings, and Income Risks in the Netherlands and the U.S (2019)
Working Paper: Family and Government Insurance: Wage, Earnings, and Income Risks in the Netherlands and the U.S (2019)
Working Paper: Family and Government Insurance: Wage, Earnings, and Income Risks in the Netherlands and the U.S (2019)
Working Paper: Family and Government Insurance: Wage, Earnings, and Income Risks in the Netherlands and the U.S (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmoi:89239

DOI: 10.21034/iwp.42

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