Seminar 237, Macroeconomics: "Changing Income Risk across the US Skill Distribution: Evidence from a Generalized Kalman Filter*"

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Submitted by Brandon Eltiste on June 05, 2022
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597 Evans Hall
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Tuesday, November 29, 2022 - 16:10
About this Event

Carter Braxton, Professor, University of Wisconsin–Madison

Abstract: For whom has earnings risk changed, and why? To answer these questions, we develop a filtering method that estimates parameters of an income process and recovers persistent and temporary earnings for every individual at every point in time. Using linked SSA-CPS earnings records, we show that since the 1980s persistent earnings risk has risen for both employed and unemployed workers and declines in persistent earnings during unemployment spells have become larger. We show that rising persistent earnings risk is concentrated among high-skill workers and related to technology adoption. Finally, we show the increase in persistent risk generates large welfare losses.