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Monday, July 02, 2007

Income Volatility and The Great Risk Shift

Jacob Hacker has revised his estimates of the degree of income volatility:

Hacker Revises Down Findings on Income Volatility, by Greg Ip: Jacob Hacker, the Yale University political scientist ... caused a stir a few years ago with a study showing that the volatility of household income had tripled between the 1970s and 1990s...

Mr. Hacker has reanalyzed the data and concluded volatility rose 85%, instead of more than 200% as he originally calculated. ...

Both studies were based on the University of Michigan’s Panel Study of Income Dynamics... But Mr. Hacker supplemented the PSID data with another data base, the Cross-National Equivalent File. Mr. Hacker says that step may have artificially boosted volatility. He also agrees ... that changes to the PSID in the early 1990s led to an artificial increase in households with zero income. Adjusting for those factors significantly reduces the increase in volatility from Mr. Hacker’s original estimate...

Mr. Hacker says while “It’s important to me these results be correct, whether the increase is a doubling or tripling is not that crucial to the basic argument of whether there is a shift of risk to workers and families. Income instability is only part of the story. It doesn’t capture the massive change in health insurance, retirement pensions, or rising levels of household debt or rates of bankruptcy or home mortgage closure.”

    Posted by on Monday, July 2, 2007 at 12:06 AM in Economics, Social Insurance | Permalink  TrackBack (0)  Comments (15)

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