TY - JOUR
T1 - Dissecting idiosyncratic earnings risk
AU - Halvorsen, Elin
AU - Holter, Hans A.
AU - Ozkan, Serdar
AU - Storesletten, Kjetil
N1 - Publisher Copyright: © The Author(s) 2023. Published by Oxford University Press on behalf of European Economic Association. All rights reserved.
Funding information: Portuguese Science and Technology Foundation (FCT), CEECIND/01695/2018, PTDC/EGE-ECO/7620/2020, 2022.07354.PTDC, UIDB/00124/2020 and Social Sciences DataLab, PINFRA/22209/2016).
PY - 2024/4
Y1 - 2024/4
N2 - This paper examines whether nonlinear and non-Gaussian features of earnings dynamics are caused by hours or hourly wages. Our findings from the Norwegian administrative and survey data are as follows: (i) Nonlinear mean reversion in earnings is driven by the dynamics of hours worked rather than wages since wage dynamics are close to linear, while hours dynamics are nonlinear—negative changes to hours are transitory, while positive changes are persistent. (ii) Large earnings changes are driven equally by hours and wages, whereas small changes are associated mainly with wage shocks. (iii) Both wages and hours contribute to negative skewness and high kurtosis for earnings changes, although hour-wage interactions are quantitatively more important. (iv) When considering household earnings and disposable household income, the deviations from normality are mitigated relative to individual labor earnings: changes in disposable household income are approximately symmetric and less leptokurtic.
AB - This paper examines whether nonlinear and non-Gaussian features of earnings dynamics are caused by hours or hourly wages. Our findings from the Norwegian administrative and survey data are as follows: (i) Nonlinear mean reversion in earnings is driven by the dynamics of hours worked rather than wages since wage dynamics are close to linear, while hours dynamics are nonlinear—negative changes to hours are transitory, while positive changes are persistent. (ii) Large earnings changes are driven equally by hours and wages, whereas small changes are associated mainly with wage shocks. (iii) Both wages and hours contribute to negative skewness and high kurtosis for earnings changes, although hour-wage interactions are quantitatively more important. (iv) When considering household earnings and disposable household income, the deviations from normality are mitigated relative to individual labor earnings: changes in disposable household income are approximately symmetric and less leptokurtic.
U2 - https://doi.org/10.1093/jeea/jvad047
DO - https://doi.org/10.1093/jeea/jvad047
M3 - Article
SN - 1542-4766
VL - 22
SP - 617
EP - 668
JO - Journal Of The European Economic Association
JF - Journal Of The European Economic Association
IS - 2
M1 - jvad047
ER -