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Working Paper
What Do Data on Millions of U.S. Workers Reveal about Life-Cycle Earnings Risk?
We study the evolution of individual labor earnings over the life cycle using a large panel data set of earnings histories drawn from U.S. administrative records. Using fully nonparametric methods, our analysis reaches two broad conclusions. First, earnings shocks display substantial deviations from lognormality?the standard assumption in the incomplete markets literature. In particular, earnings shocks display strong negative skewness and extremely high kurtosis?as high as 30 compared with 3 for a Gaussian distribution. The high kurtosis implies that in a given year, most individuals ...
Report
What Do Data on Millions of U.S. Workers Reveal about Life-Cycle Earnings Dynamics?
We study individual earnings dynamics over the life cycle using panel data on millions of U.S. workers. Using nonparametric methods, we first show that the distribution of earnings changes exhibits substantial deviations from lognormality, such as negative skewness and very high kurtosis. Further, the extent of these nonnormalities varies significantly with age and earnings level, peaking around age 50 and between the 70th and 90th percentiles of the earnings distribution. Second, we estimate nonparametric impulse response functions and find important asymmetries: positive changes for ...
Working Paper
The nature of countercyclical income risk
This paper studies the nature of business cycle variation in individual earnings risk using a dataset from the U.S. Social Security Administration, which contains (uncapped) earnings histories for millions of anonymous individuals. The base sample is a nationally representative panel containing 10 percent of all U.S. males from 1978 to 2010. We use these data to decompose individual earnings growth during recessions into "between-group" and "within-group" components. We begin with the behavior of within-group shocks. Contrary to past research, we do not find the variance of idiosyncratic ...
Report
Bad credit, no problem? Credit and labor market consequences of bad credit reports
Credit reports are used in nearly all consumer lending decisions and, increasingly, in hiring decisions in the labor market, but the impact of a bad credit report is largely unknown. We study the effects of credit reports on financial and labor market outcomes using a difference-in-differences research design that compares changes in outcomes over time for Chapter 13 filers, whose personal bankruptcy flags are removed from credit reports after seven years, to changes for Chapter 7 filers, whose personal bankruptcy flags are removed from credit reports after ten years. Using credit bureau ...
Report
The nature of countercyclical income risk
This paper studies the nature of business cycle variation in individual earnings risk using a confidential dataset from the U.S. Social Security Administration, which contains (uncapped) earnings histories for millions of individuals. The base sample is a nationally representative panel containing 10 percent of all U.S. males from 1978 to 2010. We use these data to decompose individual earnings growth during recessions into ?between-group? and ?within-group? components. We begin with the behavior of within-group shocks. Contrary to past research, we do not find the variance of idiosyncratic ...
Working Paper
The effect of disability insurance receipt on labor supply
This paper estimates the effect of the Disability Insurance program on labor supply. We find that 30% of denied applicants and 15% of allowed applicants work several years after a disability determination decision. The earnings elasticity with respect to the after tax wage is 0.8. However, the labor supply of those over age 55, college graduates, and those with mental illness is not sensitive to allowance of benefits.
Working Paper
Anatomy of Lifetime Earnings Inequality: Heterogeneity in Job Ladder Risk vs. Human Capital
We study the determinants of lifetime earnings (LE) inequality in the U.S. by focusing on job ladder dynamics and on-the-job learning as sources of wage growth. Using administrative data, we document that i) lower LE workers change jobs more often, which is mainly driven by nonemployment; ii) average annual earnings growth for job stayers is similar, around 2% in the bottom two-thirds of the LE distribution, whereas for job switchers it rises with LE; iii) top LE workers enjoy around 10% average earnings growth regardless of job switching. We estimate a job ladder model with on-the-job ...
Working Paper
The effect of Disability Insurance receipt on labor supply: a dynamic analysis
This paper estimates the effect of Disability Insurance receipt on labor supply, accounting for the dynamic nature of the application process. Exploiting the effectively random assignment of judges to disability insurance cases, we use instrumental variables to address the fact that those allowed benefits are a selected sample. We find that benefit receipt reduces labor force participation by 26 percentage points three years after a disability determination decision when not considering the dynamic nature of the applications process. OLS estimates are similar to instrumental variables ...
Working Paper
Firming Up Inequality
We use a massive, matched employer-employee database for the United States to analyze the contribution of firms to the rise in earnings inequality from 1978 to 2013. We ?nd that one-third of the rise in the variance of (log) earnings occurred within firms, whereas two-thirds of the rise occurred between firms. However, this rising between-firm variance is not accounted for by the firms themselves: the firm-related rise in the variance can be decomposed into two roughly equally important forces?a rise in the sorting of high-wage workers to high-wage firms and a rise in the segregation of ...
Working Paper
Anatomy of Lifetime Earnings Inequality: Heterogeneity in Job Ladder Risk vs. Human Capital
We study the determinants of lifetime earnings (LE) inequality in the U.S. by focusing on latent heterogeneity in job ladder dynamics and on-the-job learning as sources of wage growth differentials. Using administrative data, we find (i) more frequent job switches among lower LE workers, mainly driven by nonemployment spells, (ii) little heterogeneity in average annual earnings growth of job stayers in the bottom two-thirds of the LE distribution, and (iii) an earnings growth for job switchers that rises strongly with LE. We estimate a structural model featuring a rich set of worker types and ...