Earnings Risk in the Household: Evidence from Millions of U.S. Tax Returns

50 Pages Posted: 30 Jan 2018 Last revised: 26 Jun 2019

See all articles by Seth Pruitt

Seth Pruitt

Arizona State University (ASU) - Finance Department

Nick Turner

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: June 25, 2019

Abstract

Using detailed IRS administrative data on millions of households, we find that households effectively insure against much of the risk facing primary earners. We show that households face less risk than males alone, and households face roughly half the countercyclical risk increase. As a result of these risk differences, household certainty equivalent earnings are 19% higher than for males alone, and household certainty equivalent earnings fall by about half as much during recessions. To facilitate related research, we make available the aggregated data used in our analysis.

Keywords: earnings risk, idiosyncratic earnings shocks, household, skewness, added worker effect

JEL Classification: E32, E24, E44, J21, J31

Suggested Citation

Pruitt, Seth and Turner, Nick, Earnings Risk in the Household: Evidence from Millions of U.S. Tax Returns (June 25, 2019). Available at SSRN: https://ssrn.com/abstract=3107794 or http://dx.doi.org/10.2139/ssrn.3107794

Seth Pruitt (Contact Author)

Arizona State University (ASU) - Finance Department ( email )

W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States

Nick Turner

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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