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Moderation in higher-order earnings risk? Evidence from German cohorts

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  • Isaak, Niklas
  • Jessen, Robin

Abstract

Women born later experience greater earnings growth volatility at given ages than the next older cohort. This alone would imply a welfare loss due to increased earnings risk. However, using German registry data for the years 2001-2016, we document a moderation in higher-order earnings risk: Both men and women born later face higher skewness in earnings changes, indicating fewer large decreases than increases, and lower kurtosis at younger ages, implying fewer large earnings changes. The changes in these higher-order moments point at a welfare increase. These patterns persist for 5-year earnings changes, which are more reflective of persistent changes. Notably, during the Great Recession, all male cohorts' skewness dropped sharply, driven by greater lower-tail earnings risk, whereas younger women were much less affected.

Suggested Citation

  • Isaak, Niklas & Jessen, Robin, 2024. "Moderation in higher-order earnings risk? Evidence from German cohorts," Ruhr Economic Papers 1118, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
  • Handle: RePEc:zbw:rwirep:311187
    DOI: 10.4419/96973303
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    More about this item

    Keywords

    Wage risk; income dynamics; life cycle; business cycle;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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