Estimates of Year-to-Year Volatility in Earnings and in Household Incomes from Administrative, Survey, and Matched Data

Income Instability and the Response of the Safety Net

“…This, along with the relatively larger sample sizes of the CPS, allows me to compare the income-smoothing benefits of antipoverty programs and tax policies across family structure, race, income, and education. Many earnings and income instability studies have used longitudinal data in the Panel Study of Income Dynamics (PSID) due to the literature's early emphasis on decomposing instability into its permanent and transitory components (Cameron and Tracy 1998;Celik et al 2012;Dahl, DeLeire, and Schwabish 2011;Gittleman and Joyce 1996;Gottschalk and Moffitt 1994;Juhn and McCue 2010;Winship 2009). By using the CPS, the larger sample sizes of the 2-year matched pseudopanel data allow me to examine trends across socioeconomic subgroups with greater precision relative to traditional panel data sets in which subgroup sample sizes are oftentimes small.…”

“…where y it is income for person i in time t (CBO 2007;Dahl, DeLeire, and Schwabish 2011;Dynan, Elmendorf, and Sichel 2012;Ziliak, Hardy, and Bollinger 2011). 1 I use a "midpoint" or arc percent change formula to reduce the influence of large income swings between years, so that the arithmetic mean in the denominator is modified as…”

“…To measure instability, I construct three definitions of income: (1) income without safety net transfer spending programs or taxes, (2) income inclusive of safety net transfer spending programs, and (3) income inclusive of safety net transfer spending programs and taxes. Using these definitions, I follow CBO (2007), Dahl, DeLeire, and Schwabish (2011), and Ziliak, Hardy, and Bollinger (2011), defining income instability as the standard deviation of the arc percent income change using the definitions described above to test the collective income-smoothing characteristics of transfer programs and the tax system, the way families practically experience the safety net (Currie 2006). Across all U.S. families, transfer programs lower family income instability by 18% since the early 1980s, and the trend after accounting for the safety net is relatively stable toward the end of the 2000s.…”

Recent Trends in Men's Earnings Volatility: Evidence from the National Longitudinal Survey of Youth, 1985-2009

“…As repeatedly reported byZiliak et al (2011) andDynan et al (2008), observed trends in earnings volatility are different between genders: Both studies show that while measured earnings volatility has been generally increasing for men from the early 1970s to the late 2000s, it has been generally decreasing for women for the same period. Therefore, althoughFigure 4ofDahl et al (2011) shows a flat trend in earnings volatility even in the recent period, it could be that men's earnings volatility has increased over the same period.2 The B.E. Journal of Economic Analysis & Policy, Vol.…”

“…InDahl et al (2011), the same authors extend their analysis to family income and the sample period up to 2005, but the analysis of individual earnings in this latter study is less detailed than the 2007 analysis. For example, inFigure 4ofDahl et al (2011, p. 763), which is the only analysis of individual earnings, they do not report the results for men and women separately.…”