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Title: From the Peaks to the Valleys: Cross-State Evidence on Income Volatility over the Business Cycle

Citation Type: Journal Article

Publication Year: 2013

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Abstract: Countercyclical variation in individuals' idiosyncratic labor income risk could generate substantial welfare costs. Following past research, we infer income volatility - the variance of permanent income shocks, a standard proxy for income risk - from the rate at which cross-sectional variances of income rise over the life cycle for a given cohort. Our novelty lies in exploiting cross-state variation in state economic conditions or state sensitivity to national economic conditions. We find that income volatility is higher in good state times than bad; during good national times, we find volatility is higher in states that are more sensitive to national conditions.

Url: http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00299

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Authors: Shore, Stephen H.; Carey, Colleen

Periodical (Full): Review of Economics and Statistics

Issue: 2

Volume: 95

Pages: 549-562

Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure, Migration and Immigration

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