Citations (25)



The Evolution of Household Income Volatility

Karen E. Dynan

US Treasury; affiliation not provided to SSRN

Douglas W. Elmendorf

Harvard Kennedy School

Daniel E. Sichel

Wellesley College; NBER

July 15, 2012

Using a representative longitudinal survey of U.S. households, we find that household income became noticeably more volatile between the early 1970s and the late 2000s despite the moderation seen in aggregate economic activity during this period. We estimate that the standard deviation of percent changes in household income rose about 30 percent between 1971 and 2008. This widening in the distribution of percent changes was concentrated in the tails. The share of households experiencing a 50 percent plunge in income over a two-year period climbed from about 7 percent in the early 1970s to more than 12 percent in the early 2000s before retreating to 10 percent in the run-up to the Great Recession. Households’ labor earnings and transfer payments have both become more volatile over time. The rise in the volatility of men’s earnings appears to reflect greater volatility in earnings per hour and in hours worked.

Number of Pages in PDF File: 49

Keywords: income volatility, income dynamics, household income, household economic security

JEL Classification: B22, D31, E32, j39

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Date posted: September 8, 2012  

Suggested Citation

Dynan, Karen E. and Elmendorf, Douglas W. and Sichel, Daniel E., The Evolution of Household Income Volatility (July 15, 2012). Available at SSRN: https://ssrn.com/abstract=2138990 or http://dx.doi.org/10.2139/ssrn.2138990

Contact Information

Karen E. Dynan
US Treasury ( email )
1500 Pennsylvania Avenue
Washington, DC 20220
United States
2026222200 (Phone)
2026222200 (Fax)
affiliation not provided to SSRN
Douglas W. Elmendorf
Harvard Kennedy School ( email )
79 John F. Kennedy Street
Cambridge, MA 02138
United States
Daniel E. Sichel (Contact Author)
Wellesley College ( email )
106 Central St.
Wellesley, MA 02181
United States
NBER ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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