The Pass-Through of Uncertainty Shocks to Households
Marco Di Maggio (),
Rodney Ramcharan (),
Vincent Yao () and
No 27646, NBER Working Papers from National Bureau of Economic Research, Inc
Using new employer-employee matched data, this paper investigates the impact of uncertainty, as measured by idiosyncratic stock market volatility, on individual outcomes. We find that firms provide at best partial insurance to their workers. An increase in firm-level uncertainty is associated with a decline in total compensation, especially in variable pay. In turn, individuals reduce their durable goods consumption in response to these uncertainty shocks. These shocks also lead to greater financial fragility among lower-income earners. We also construct a new county-level uncertainty shock and find that local uncertainty shocks reduce county level durable consumption.
JEL-codes: D12 D14 E21 G5 G51 (search for similar items in EconPapers)
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