The curious incidence of shocks along the income distribution

Tobias Broer, John Kramer and Kurt Mitman
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Tobias Broer: Stockholm University

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Abstract: We use detailed labor market data from Germany to study the comovement of individual earnings as well as separation and job-finding probabilities with fluctuations in aggregate output. In addition, we estimate impulse responses of these variables to monetary policy shocks identified from high-frequency changes in Overnight Indexed Swap rates. We find that workers at the bottom of the income distribution are more exposed to aggregate earnings risk in general, and to monetary policy shocks specifically. Income risk for the poor is almost entirely ‘extensive', or due to cyclical fluctuations in labor market transitions, through procyclical job-finding and countercyclical separation rates. At higher incomes, in contrast,‘intensive'risk, from fluctuating income growth in continued employment, accounts for half of cyclical movements in income risk.

Date: 2020
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Citations: View citations in EconPapers (3)

Published in Mimeo, Institute for International Economic Studies, Stockholm University, 2020

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04489790

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