Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/288252 
Year of Publication: 
2023
Citation: 
[Journal:] The Scandinavian Journal of Economics [ISSN:] 1467-9442 [Volume:] 125 [Issue:] 4 [Publisher:] Wiley [Place:] Hoboken, NJ [Year:] 2023 [Pages:] 956-996
Publisher: 
Wiley, Hoboken, NJ
Abstract: 
We decompose earnings risk into contributions from hours and wage shocks. To distinguish between hours shocks, modeled as innovations to the marginal disutility of work, and labor supply reactions to wage shocks, we formulate a life‐cycle model of consumption and labor supply. For estimation, we use data on married American men from the Panel Study of Income Dynamics. Permanent wage shocks explain 31 percent of total risk, permanent hours shocks 21 percent. Progressive taxation attenuates cross‐sectional earnings risk, but its life‐cycle insurance impact is much smaller. At the mean, a one‐standard‐deviation hours shock raises lifetime income by 11 percent, a wage shock by 13 percent.
Subjects: 
Labor supply
earnings risk
structural estimation
progressive taxation
consumption insurance
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

Files in This Item:
File
Size





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