TY - JOUR
T1 - Changing Income Risk across the US Skill Distribution
T2 - Evidence from a Generalized Kalman Filter
AU - Braxton, J. Carter
AU - Herkenhoff, Kyle
AU - Rothbaum, Jonathan
AU - Schmidt, Lawrence
N1 - Publisher Copyright:
© 2025 American Economic Association. All rights reserved.
PY - 2025/12
Y1 - 2025/12
N2 - For whom has earnings risk changed, and why? We answer these questions by combining the Kalman filter and EM algorithm to estimate persistent and temporary earnings for every individual at every point in time. We apply our method to administrative earnings linked with survey data. We show that since the 1980s, persistent earnings risk rose by 12.5 percent for both employed and unemployed workers and the scarring effects of unemployment doubled. At the same time, temporary earnings risk declined. Using education and occupation codes, we show that rising persistent earnings risk is concentrated among high-skill workers and related to technology adoption.
AB - For whom has earnings risk changed, and why? We answer these questions by combining the Kalman filter and EM algorithm to estimate persistent and temporary earnings for every individual at every point in time. We apply our method to administrative earnings linked with survey data. We show that since the 1980s, persistent earnings risk rose by 12.5 percent for both employed and unemployed workers and the scarring effects of unemployment doubled. At the same time, temporary earnings risk declined. Using education and occupation codes, we show that rising persistent earnings risk is concentrated among high-skill workers and related to technology adoption.
UR - https://www.scopus.com/pages/publications/105023317559
UR - https://www.scopus.com/pages/publications/105023317559#tab=citedBy
U2 - 10.1257/aer.20231656
DO - 10.1257/aer.20231656
M3 - Article
AN - SCOPUS:105023317559
SN - 0002-8282
VL - 115
SP - 4438
EP - 4475
JO - American Economic Review
JF - American Economic Review
IS - 12
ER -