Worker Betas: Five Facts About Systematic Earnings Risk

38 Pages Posted: 9 Mar 2017

See all articles by Fatih Guvenen

Fatih Guvenen

University of Minnesota - Department of Economics; National Bureau of Economic Research (NBER)

Sam Schulhofer-Wohl

Federal Reserve Bank of Chicago

Motohiro Yogo

Princeton University - Department of Economics; National Bureau of Economic Research

Multiple version iconThere are 2 versions of this paper

Date Written: 2017-01-18

Abstract

The magnitude of and heterogeneity in systematic earnings risk has important implications for various theories in macro, labor, and financial economics. Using administrative data, we document how the aggregate risk exposure of individual earnings to GDP and stock returns varies across gender, age, the worker’s earnings level, and industry. Aggregate risk exposure is U-shaped with respect to the earnings level. In the middle of the earnings distribution, males, younger workers, and those in construction and durable manufacturing are more exposed to aggregate risk. At the top of the earnings distribution, older workers and those in finance are more exposed to aggregate risk. Workers in larger employers are less exposed to aggregate risk, but they are more exposed to a common factor in employer-level earnings, especially at the top of the earnings distribution. Within an employer, higher-paid workers have higher exposure to the employer-level risk than lower-paid workers.

Keywords: GDP (gross domestic product), Income, Investments

JEL Classification: D31, G11

Suggested Citation

Guvenen, Fatih and Schulhofer-Wohl, Sam and Yogo, Motohiro, Worker Betas: Five Facts About Systematic Earnings Risk (2017-01-18). FRB of Chicago Working Paper No. WP-2017-4. Available at SSRN: https://ssrn.com/abstract=2929411

Fatih Guvenen (Contact Author)

University of Minnesota - Department of Economics ( email )

Minneapolis, MN 55455
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Sam Schulhofer-Wohl

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

HOME PAGE: http://sschulh1.wordpress.com

Motohiro Yogo

Princeton University - Department of Economics ( email )

Julis Romo Rabinowitz Building
Princeton, NJ 08544
United States

HOME PAGE: http://sites.google.com/site/motohiroyogo/

National Bureau of Economic Research

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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