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, aggregate risk exposure is higher for males, younger workers, and those in construction and durable manufacturing. At the top of the earnings distribution, aggregate risk exposure is higher for older workers and those in ﬁnance. 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 employer-level risk than lower-paid workers.
- Guvenen: Top Income Inequality in the 21st Century: Some Cautionary Notes
- Ohanian: Who Defaults on Their Mortgage, and Why? Policy Implications for Reducing Mortgage Default
- Arellano, Bai, Mihalache: Default Risk, Sectoral Reallocation and Persistent Recessions
- Eggertsson, Mehrotra, Robbins: A Model of Secular Stagnation: Theory and Quantitative Evaluation
- Crouzet and Mehrotra: Small and Large Firms over the Business Cycle
Subscribe to receive email alerts when economists from the Federal Reserve Bank of Minneapolis publish new Staff Reports, Working Papers or Economic Policy Papers. Occasionally other important news will be shared.