IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/26527.html
   My bibliography  Save this paper

Income and Wealth Volatility: Evidence from Italy and the U.S. in the Past Two Decades

Author

Listed:
  • Conchita D'Ambrosio
  • Giorgia Menta
  • Edward N. Wolff

Abstract

Income volatility and wealth volatility are central objects of investigation for the literature on income and wealth inequality and dynamics. Here we analyse the two concepts in a comparative perspective for the same individuals in Italy and the U.S. over the last two decades. Contrary to our expectations, we find that in both countries wealth volatility reaches significantly higher values than income volatility, the effect being mostly driven by changes in the market value of real estate assets. We also show that there is more volatility in both dimensions in the United States and that the overall trend in both countries is increasing over time. We conclude by exploring volatility in consumption.

Suggested Citation

  • Conchita D'Ambrosio & Giorgia Menta & Edward N. Wolff, 2019. "Income and Wealth Volatility: Evidence from Italy and the U.S. in the Past Two Decades," NBER Working Papers 26527, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:26527
    Note: LS
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w26527.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Joseph E. Stiglitz, 2012. "Macroeconomic Fluctuations, Inequality, and Human Development," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 13(1), pages 31-58, February.
    2. Mariacristina De Nardi & Giulio Fella, 2017. "Saving and Wealth Inequality," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 26, pages 280-300, October.
    3. Robert Moffitt & Sisi Zhang, 2018. "Income Volatility and the PSID: Past Research and New Results," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 277-280, May.
    4. Cowell, Frank & Mercader-Prats, Magda, 1999. "Equivalence scales and inequality," LSE Research Online Documents on Economics 2190, London School of Economics and Political Science, LSE Library.
    5. Òscar Jordà & Katharina Knoll & Dmitry Kuvshinov & Moritz Schularick & Alan M Taylor, 2019. "The Rate of Return on Everything, 1870–2015," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(3), pages 1225-1298.
    6. Bartels, Charlotte & Bönke, Timm, 2010. "German male income volatility 1984 to 2008," Discussion Papers 2010/18, Free University Berlin, School of Business & Economics.
    7. Jonathan D. Fisher & David S. Johnson, 2020. "Inequality and Mobility over the Past Half-Century Using Income, Consumption, and Wealth," NBER Chapters, in: Measuring Distribution and Mobility of Income and Wealth, pages 437-455, National Bureau of Economic Research, Inc.
    8. Tullio Jappelli & Luigi Pistaferri, 2010. "Does Consumption Inequality Track Income Inequality in Italy?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 133-153, January.
    9. Bewley, Truman, 1977. "The permanent income hypothesis: A theoretical formulation," Journal of Economic Theory, Elsevier, vol. 16(2), pages 252-292, December.
    10. Shin, Donggyun & Solon, Gary, 2011. "Trends in men's earnings volatility: What does the Panel Study of Income Dynamics show?," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 973-982, August.
    11. Jenkins, Stephen P., 2011. "Changing Fortunes: Income Mobility and Poverty Dynamics in Britain," OUP Catalogue, Oxford University Press, number 9780199226436.
    12. Tito Boeri & Andrea Brandolini, 2004. "The Age of Discontent: Italian Households at the Beginning of the Decade," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 63(3-4), pages 449-487, December.
    13. Jason M. DeBacker & Bradley T. Heim & Vasia Panousi & Ivan Vidangos, 2011. "Rising inequality: transitory or permanent? New evidence from a U.S. panel of household income 1987-2006," Finance and Economics Discussion Series 2011-60, Board of Governors of the Federal Reserve System (U.S.).
    14. John Whalley & Ximing Yue, 2009. "Rural Income Volatility and Inequality in China," CESifo Economic Studies, CESifo, vol. 55(3-4), pages 648-668.
    15. Peter Gottschalk & Robert Moffitt, 1994. "The Growth of Earnings Instability in the U.S. Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 217-272.
    16. Deaton, Angus & Paxson, Christina, 1994. "Intertemporal Choice and Inequality," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 437-467, June.
    17. Huang, Ho-Chuan (River) & Fang, WenShwo & Miller, Stephen M. & Yeh, Chih-Chuan, 2015. "The effect of growth volatility on income inequality," Economic Modelling, Elsevier, vol. 45(C), pages 212-222.
    18. Diaz-Serrano, Luis, 2005. "On the negative relationship between labor income uncertainty and homeownership: Risk-aversion vs. credit constraints," Journal of Housing Economics, Elsevier, vol. 14(2), pages 109-126, June.
    19. Edward N. Wolff, 2017. "Household Wealth Trends in the United States, 1962 to 2016: Has Middle Class Wealth Recovered?," NBER Working Papers 24085, National Bureau of Economic Research, Inc.
    20. Robert A. Moffitt & Peter Gottschalk, 2012. "Trends in the Transitory Variance of Male Earnings: Methods and Evidence," Journal of Human Resources, University of Wisconsin Press, vol. 47(1), pages 204-236.
    21. Shorrocks, A F, 1982. "Inequality Decomposition by Factor Components," Econometrica, Econometric Society, vol. 50(1), pages 193-211, January.
    22. Jonathan Heathcote & Fabrizio Perri, 2018. "Wealth and Volatility," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(4), pages 2173-2213.
    23. Charlotte Bartels & Timm Bönke, 2013. "Can Households And Welfare States Mitigate Rising Earnings Instability?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 59(2), pages 250-282, June.
    24. Daniel Feenberg & Elisabeth Coutts, 1993. "An introduction to the TAXSIM model," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 189-194.
    25. Daly, Mary C. & Valletta, Robert G., 2008. "Cross-national trends in earnings inequality and instability," Economics Letters, Elsevier, vol. 99(2), pages 215-219, May.
    26. Dynan Karen & Elmendorf Douglas & Sichel Daniel, 2012. "The Evolution of Household Income Volatility," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(2), pages 1-42, December.
    27. Robert A. Moffitt & Peter Gottschalk, 2002. "Trends in the Transitory Variance of Earnings in the United States," Economic Journal, Royal Economic Society, vol. 112(478), pages 68-73, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Silvia Avram & Mike Brewer & Paul Fisher & Laura Fumagalli, 2022. "Household Earnings and Income Volatility in the UK, 2009–2017," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 20(2), pages 345-369, June.
    2. Jonathan D. Fisher & David S. Johnson, 2020. "Inequality and Mobility over the Past Half-Century Using Income, Consumption, and Wealth," NBER Chapters, in: Measuring Distribution and Mobility of Income and Wealth, pages 437-455, National Bureau of Economic Research, Inc.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Silvia Avram & Mike Brewer & Paul Fisher & Laura Fumagalli, 2022. "Household Earnings and Income Volatility in the UK, 2009–2017," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 20(2), pages 345-369, June.
    2. Cappellari, Lorenzo & Jenkins, Stephen P., 2014. "Earnings and labour market volatility in Britain, with a transatlantic comparison," Labour Economics, Elsevier, vol. 30(C), pages 201-211.
    3. Robert A. Moffitt, 2020. "Reconciling Trends in U.S. Male Earnings Volatility: Results from a Four Data Set Project," NBER Working Papers 27664, National Bureau of Economic Research, Inc.
    4. Robert Moffitt & Sisi Zhang, 2018. "Income Volatility and the PSID: Past Research and New Results," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 277-280, May.
    5. Avcioglu, Sahin & Karabay, Bilgehan, 2019. "Search efficiency, wage dynamics and welfare," Economic Modelling, Elsevier, vol. 83(C), pages 270-286.
    6. Cappellari, Lorenzo & Jenkins, Stephen P., 2014. "Earnings and labour market volatility in Britain, with a transatlantic comparison," Labour Economics, Elsevier, vol. 30(C), pages 201-211.
    7. Giesecke, Matthias & Bönke, Timm & Lüthen, Holger, 2011. "The Dynamics of Earnings in Germany: Evidence from Social Security Records," VfS Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis 48692, Verein für Socialpolitik / German Economic Association.
    8. Feigenbaum James A. & Li Geng, 2012. "Life Cycle Dynamics of Income Uncertainty and Consumption," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(1), pages 1-49, May.
    9. Markus Jäntti & Stephen P. Jenkins, 2013. "Income Mobility," SOEPpapers on Multidisciplinary Panel Data Research 607, DIW Berlin, The German Socio-Economic Panel (SOEP).
    10. Robert Moffitt & John Abowd & Christopher Bollinger & Michael Carr & Charles Hokayem & Kevin McKinney & Emily Wiemers & Sisi Zhang & James Ziliak, 2022. "Reconciling Trends in U.S. Male Earnings Volatility: Results from Survey and Administrative Data," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 41(1), pages 1-11, December.
    11. Robert Moffitt & Sisi Zhang, 2022. "Estimating Trends in Male Earnings Volatility with the Panel Study of Income Dynamics," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 41(1), pages 20-25, December.
    12. Sisi Zhang, 2014. "Wage shocks, household labor supply, and income instability," Journal of Population Economics, Springer;European Society for Population Economics, vol. 27(3), pages 767-796, July.
    13. Kyong Hyun Koo, 2016. "The Evolution of Earnings Volatility During and After the Great Recession," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 55(4), pages 705-732, October.
    14. Mirko Felchner, 2015. "Einkommensdynamik bei Selbständigen als Freie Berufe und abhängig Beschäftigte Eine dynamische Paneldatenschätzung mit Daten des Sozio-oekonomischen Panels," FFB-Discussionpaper 101, Research Institute on Professions (Forschungsinstitut Freie Berufe (FFB)), LEUPHANA University Lüneburg.
    15. Sabelhaus, John & Song, Jae, 2010. "The great moderation in micro labor earnings," Journal of Monetary Economics, Elsevier, vol. 57(4), pages 391-403, May.
    16. Paula Garda & Volker Ziemann, 2014. "Economic Policies and Microeconomic Stability: A Literature Review and Some Empirics," OECD Economics Department Working Papers 1115, OECD Publishing.
    17. Mario Alloza, 2021. "The impact of taxes on income mobility," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(4), pages 794-854, August.
    18. Stephen P. Jenkins, 2011. "Has the Instability of Personal Incomes been Increasing?," National Institute Economic Review, National Institute of Economic and Social Research, vol. 218(1), pages 33-43, October.
    19. Bartels, Charlotte & Neumann, Dirk, 2021. "Redistribution and Insurance in Welfare States around the World," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 123(4), pages 1116-1158.
    20. Timothy M. Smeeding, 2018. "The PSID in Research and Policy," The ANNALS of the American Academy of Political and Social Science, , vol. 680(1), pages 29-47, November.

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:26527. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.