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The Economic Security Index: a new measure for research and policy analysis

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  • Jacob S. Hacker
  • Gregory Huber
  • Austin Nichols
  • Philipp Rehm
  • Mark Schlesinger
  • Robert G. Valletta
  • Stuart Craig

Abstract

This paper presents the Economic Security Index (ESI), a new, more comprehensive measure of economic insecurity. By combining data from multiple surveys, we create an integrated measure of volatility in available household resources, accounting for fluctuations in income and out-of pocket medical expenses, as well as financial wealth sufficient to buffer against these shocks. We find that insecurity has risen steadily since the mid-1980s for virtually all subgroups of Americans, albeit with cyclical ups and downs. We also find, however, that there is substantial disparity in the degree to which different groups are exposed to economic risk. As the ESI derives from a data-independent conceptual foundation, it can be measured using different data sources. We find that the degree and disparity by which insecurity has risen is robust across these sources.

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Bibliographic Info

Paper provided by Federal Reserve Bank of San Francisco in its series Working Paper Series with number 2012-21.

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Date of creation: 2012
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Handle: RePEc:fip:fedfwp:2012-21

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Keywords: Households - Economic aspects;

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References

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  1. Gerlinde Fellner & Matthias Sutter, 2005. "Causes, consequences, and cures of myopic loss aversion - An experimental investigation," Papers on Strategic Interaction 2005-15, Max Planck Institute of Economics, Strategic Interaction Group.
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  4. Agell, Jonas, 1999. "On the Benefits from Rigid Labour Markets: Norms, Market Failures, and Social Insurance," Economic Journal, Royal Economic Society, vol. 109(453), pages F143-64, February.
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  7. Christopher D. Carroll & Karen E. Dynan & Spencer D. Krane, 1999. "Unemployment risk and precautionary wealth: evidence from households' balance sheets," Finance and Economics Discussion Series 1999-15, Board of Governors of the Federal Reserve System (U.S.).
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  10. Gabor Kezdi & Purvi Sevak, 2004. "Economic Adjustment of Recent Retirees to Adverse Wealth Shocks," Working Papers wp075, University of Michigan, Michigan Retirement Research Center.
  11. Austin Nichols & Melissa M. Favreault, 2008. "The Impact of Changing Earnings Volatility on Retirement Wealth," Working Papers, Center for Retirement Research at Boston College wp2008-14, Center for Retirement Research, revised Dec 2008.
  12. Dickens, William T, 1984. "Differences between Risk Premiums in Union and Nonunion Wages and the Case for Occupational Safety Regulation," American Economic Review, American Economic Association, vol. 74(2), pages 320-23, May.
  13. Olga Gorbachev, 2011. "Did Household Consumption Become More Volatile?," American Economic Review, American Economic Association, vol. 101(5), pages 2248-70, August.
  14. Nichols, Austin, 2008. "Trends in Income Inequality, Volatility, and Mobility Risk," IRISS Working Paper Series 2008-10, IRISS at CEPS/INSTEAD.
  15. Melvin Stephens Jr., 2001. "Worker Displacement and the Added Worker Effect," NBER Working Papers 8260, National Bureau of Economic Research, Inc.
  16. Annamaria Lusardi & Daniel J. Schneider & Peter Tufano, 2011. "Financially Fragile Households: Evidence and Implications," NBER Working Papers 17072, National Bureau of Economic Research, Inc.
  17. Annamaria Lusardi & Daniel Schneider & Peter Tufano, 2011. "Financially Fragile Households: Evidence and Implications," CeRP Working Papers 116, Center for Research on Pensions and Welfare Policies, Turin (Italy).
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Cited by:
  1. Smith, Trenton G. & Stillman, Steven & Craig, Stuart, 2013. "The U.S. Obesity Epidemic:New Evidence from the Economic Security Index," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 151419, Agricultural and Applied Economics Association.

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