Social and Behavioral Sciences Commons^™

Decomposing Trends In Income Volatility: The ‘Wild Ride’ At The Top And Bottom, Bradley Hardy, James P. Ziliak

University of Kentucky Center for Poverty Research Discussion Paper Series

We provide a detailed accounting of the trend increase in family income volatility in recent decades by quantifying the contributions of household head earnings, spouse earnings, non-transfer non-labor income, transfer income, and tax payments (inclusive of the refundable Earned Income Tax Credit), along with covariances among the income components. Using twoyear matched panels in the Current Population Survey from 1980 to 2009, we find that the volatility of family income, as measured by the variance of the arc percent change, doubled over the past three decades. The increase in volatility was most pronounced among the top 1% of the income …