Earnings Volatility Trends and the Great Moderation: A Multifactor Residual Approach
Atlantic Economic Journal, 2015, vol. 43, issue 2, 229-245
To explore trends in idiosyncratic income volatility, this paper employs a multifactor residual model to extract macroeconomic factors from individual changes in wages and total family income. The data used in this analysis is a subset of the persistently employed from the Panel Survey of Income Dynamics (PSID). Using this subset expands the income volatility literature by bridging an existing gap between studies using the PSID and others using a continuous work history sample. Improved aggregate economic conditions can explain much of the reduction in unconditional income volatility that took place during the Great Moderation, lasting from the mid-1980s into the 2000s. However, macro factors appear to be making larger contributions to individual and household income volatility following the recent rise in GDP volatility. In contrast, idiosyncratic volatility of income, that which remains after accounting for macroeconomic factors, has generally remained consistent. The stability of idiosyncratic income volatility suggests employment changes in the recent crisis were cyclical rather than structural. Copyright International Atlantic Economic Society 2015
Keywords: Income volatility; PSID; Great moderation; Multifactor residual; Labor earnings; E32; J11 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:kap:atlecj:v:43:y:2015:i:2:p:229-245
Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/11293/PS2
Access Statistics for this article
Atlantic Economic Journal is currently edited by Kathleen S. Virgo
More articles in Atlantic Economic Journal from Springer, International Atlantic Economic Society Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().