Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/198954 
Year of Publication: 
2019
Series/Report no.: 
CESifo Working Paper No. 7594
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper establishes new evidence on the cyclical behaviour of household income risk in Great Britain and assesses the role of social insurance policy in mitigating against this risk. We address these issues using the British Household Panel Survey (1991-2008) by decomposing stochastic idiosyncratic income into its transitory, persistent and fixed components. We then estimate how income risk, measured by the variance and the skewness of the probability distribution of shocks to the persistent component, varies between expansions and contractions of the aggregate economy. We first find that the volatility and left-skewness of these shocks is a-cyclical and counter-cyclical respectively. The latter implies a higher probability of receiving large negative income shocks in contractions. We also find that while social insurance (tax-benefits) policy reduces the levels of both measures of risk as well as the counter-cyclicality of the asymmetry measure, the mitigation effects work mainly via benefits.
Subjects: 
household income risk
social insurance policy
aggregate fluctuations
JEL: 
D31
E24
J31
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.