TY  - UNPD
A1  - Busch, Christopher
A1  - Ludwig, Alexander
T1  - Higher-order income risk over the business cycle
N2  - 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.
T3  - ICIR Working Paper Series - No. 36 [28.01.2021] 
KW  - Idiosyncratic Income Risk
KW  - Cyclical Income Risk
KW  - LifeCycle Model
Y1  - 2021
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/77253
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-772538
UR  - https://www.icir.de/fileadmin/user_upload/editors/documents/working_papers/wp_36_ludwig_busch.pdf
VL  - January 28, 2021
PB  - International Center for Insurance Regulation
CY  - Frankfurt am Main
ER  -