Moderation in higher-order earnings risk? Evidence from German cohorts

Niklas Isaak and Robin Jessen

No 1118, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: Women born later experience greater earnings growth volatility at given ages than the next older cohort. This alone would imply a welfare loss due to increased earnings risk. However, using German registry data for the years 2001-2016, we document a moderation in higher-order earnings risk: Both men and women born later face higher skewness in earnings changes, indicating fewer large decreases than increases, and lower kurtosis at younger ages, implying fewer large earnings changes. The changes in these higher-order moments point at a welfare increase. These patterns persist for 5-year earnings changes, which are more reflective of persistent changes. Notably, during the Great Recession, all male cohorts' skewness dropped sharply, driven by greater lower-tail earnings risk, whereas younger women were much less affected.

Keywords: Wage risk; income dynamics; life cycle; business cycle (search for similar items in EconPapers)
JEL-codes: D31 E24 J31 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:311187

DOI: 10.4419/96973303

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