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A Nonparametric Characterization of Income Uncertainty over the Lifecycle

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  • Geng Li

    (Federal Reserve Board)

  • James Feigenbaum

    (University of Pittsburgh)

Abstract

In addition, we show that income uncertainty exhibits a U-shaped profile over the lifecyle, with young and old households facing greater uncertainty than middle-aged households. This pattern is particularly pronounced for near and intermediate forecast horizons. Our results are robust to various sample and model specifications and hold with respect to both labor and total family income. As opposed to a unit-root process, we find that our nonparametric estimates are better replicated by an income process with highly persistent, autoregressive shocks that have age and horizon dependent variances.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2009 Meeting Papers with number 464.

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Date of creation: 2009
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Handle: RePEc:red:sed009:464

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Cited by:
  1. James Feigenbaum & Geng Li, 2008. "Lifecycle dynamics of income uncertainty and consumption," Finance and Economics Discussion Series 2008-27, Board of Governors of the Federal Reserve System (U.S.).

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