Higher-order income risk over the business cycle
- We extend the canonical income process with persistent and transitory risk to cyclical shock distributions with left-skewness and excess kurtosis. We estimate our income process by GMM for US household data. We find countercyclical variance and procyclical skewness of persistent shocks. All shock distributions are highly leptokurtic. The tax and transfer system reduces dispersion and left-skewness. We then show that in a standard incomplete-markets life-cycle model, first, higherorder risk has sizable welfare implications, which depend on risk attitudes; second, it matters quantitatively for the welfare costs of cyclical idiosyncratic risk; third, it has non-trivial implications for self-insurance against shocks.
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| Verfasserangaben: | Christopher BuschORCiDGND, Alexander LudwigORCiDGND |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-772538 |
| URL: | https://www.icir.de/fileadmin/user_upload/editors/documents/working_papers/wp_36_ludwig_busch.pdf |
| Schriftenreihe (Bandnummer): | ICIR Working Paper Series (No. 36 [28.01.2021]) |
| Verlag: | International Center for Insurance Regulation |
| Verlagsort: | Frankfurt am Main |
| Dokumentart: | Arbeitspapier |
| Sprache: | Englisch |
| Jahr der Fertigstellung: | 2021 |
| Jahr der Erstveröffentlichung: | 2021 |
| Veröffentlichende Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Datum der Freischaltung: | 18.04.2024 |
| Freies Schlagwort / Tag: | Cyclical Income Risk; Idiosyncratic Income Risk; LifeCycle Model |
| Jahrgang: | January 28, 2021 |
| Seitenzahl: | 91 |
| Institute: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE) | |
| DDC-Klassifikation: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Sammlungen: | Universitätspublikationen |
| Lizenz (Deutsch): |  Deutsches Urheberrecht |
