A Risky Venture: Income Dynamics among Pass-Through Business Owners

Jason DeBacker, Vasia Panousi and Shanthi Ramnath

American Economic Journal: Macroeconomics, 2023, vol. 15, issue 1, 444-74

Abstract: We employ a large panel of US income tax returns for the period 1987–2018 to extensively characterize and quantify business income risk. Our findings show business income to be much riskier than labor income. Business income is less persistent and is characterized by higher tail risk. Furthermore, when compared to labor income, heterogeneity across households is less important in explaining the cross-sectional variation in business income, and within-household income variation is more important. Our results underscore the income risks business owners face and provide stylized facts and parameter estimates useful for quantitative macroeconomic models and policy analysis.

JEL-codes: D31 G51 H24 J23 J31 K34 L26 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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DOI: 10.1257/mac.20200134

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