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Measuring Trends in Income Variability

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Publication Date: June 2008

Publisher(s): Tax Policy Center

Author(s): Austin Nichols; Seth Zimmerman

Special Collection: John D. and Catherine T. MacArthur Foundation

Topic: Economics (Economic conditions)

Keywords: Families/Parenting; Economic Well-being; Economy; Income and Wealth Distribution

Type: Report


Using PSID data from 1968 to 2005, we find that the volatility of family income has increased over time (a trend that is robust to a large variety of modeling choices) but the trend in individual income volatility is less clear. Measurement error cannot fully account for these facts, but the increasing covariance of individual incomes within the family (driven by increases in the correlation of head and spouse earnings, due largely to the increased proportion of families with two earners) can.