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How Risky Are Recessions for Top Earners?

Author

Listed:
  • Fatih Guvenen
  • Greg Kaplan
  • Jae Song

Abstract

How sensitive to business cycles are the earnings of top earners? And, how does the business cycle sensitivity of top earners vary by industry? We use a confidential dataset on earnings histories of US males from the Social Security Administration. On average, individuals in the top 1 percent of the earnings distribution are slightly more cyclical than the population average. But there are large differences across sectors; top earners in Finance, Insurance, and Real Estate (FIRE) and Construction face substantial business cycle volatility, whereas those in Services (who make up 40 percent of individuals in the top 1 percent) have earnings that are less cyclical than the average worker.

Suggested Citation

  • Fatih Guvenen & Greg Kaplan & Jae Song, 2014. "How Risky Are Recessions for Top Earners?," American Economic Review, American Economic Association, vol. 104(5), pages 148-153, May.
  • Handle: RePEc:aea:aecrev:v:104:y:2014:i:5:p:148-53
    Note: DOI: 10.1257/aer.104.5.148
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    References listed on IDEAS

    as
    1. Fatih Guvenen & Serdar Ozkan & Jae Song, 2014. "The Nature of Countercyclical Income Risk," Journal of Political Economy, University of Chicago Press, vol. 122(3), pages 621-660.
    2. Gerald Auten & Geoffrey Gee & Nicholas Turner, 2013. "Income Inequality, Mobility, and Turnover at the Top in the US, 1987-2010," American Economic Review, American Economic Association, vol. 103(3), pages 168-172, May.
    3. Jon Bakija & Adam Cole & Bradley Heim, 2008. "Jobs and Income Growth of Top Earners and the Causes of Changing Income Inequality: Evidence from U.S. Tax Return Data," Department of Economics Working Papers 2010-22, Department of Economics, Williams College, revised Jan 2012.
    4. Wojciech Kopczuk & Emmanuel Saez & Jae Song, 2010. "Earnings Inequality and Mobility in the United States: Evidence from Social Security Data Since 1937," The Quarterly Journal of Economics, Oxford University Press, vol. 125(1), pages 91-128.
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    Citations

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    Cited by:

    1. Philippe Aghion & Ufuk Akcigit & Antonin Bergeaud & Richard Blundell & David Hemous, 2019. "Innovation and Top Income Inequality," Review of Economic Studies, Oxford University Press, vol. 86(1), pages 1-45.
    2. Frédéric Teulon & Guillaume Bigot & Bernard Terrany & Negar Youssefian, 2016. "Rémunérations des PDG : toniques ou toxiques ? Une mise en perspective de la littérature," Post-Print hal-01865108, HAL.
    3. Böhm, Michael & Metzger, Daniel & Strömberg, Per Johan, 2018. ""Since you're so rich, you must be really smart": Talent and the Finance Wage Premium," CEPR Discussion Papers 12711, C.E.P.R. Discussion Papers.
    4. repec:ces:ifofor:v:19:y:2018:i:2:p:19-25 is not listed on IDEAS
    5. Beatriz Muriel & Horacio Vera, 2015. "The Effects of Economic Growth on Earnings in Bolivia," Development Research Working Paper Series 08/2015, Institute for Advanced Development Studies.
    6. Jesse Bricker & Alice Henriques & Jacob Krimmel & John Sabelhaus, 2016. "Measuring Income and Wealth at the Top Using Administrative and Survey Data," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 47(1 (Spring), pages 261-331.
    7. Böhm, Michael & Metzger, Daniel & Strömberg, Per, 2015. "Since you’re so rich, you must be really smart”: Talent and the Finance Wage Premium," Working Paper Series 313, Sveriges Riksbank (Central Bank of Sweden).

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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