Seminar

Income Risk Inequality:Evidence from Spanish Administrative Records

Manuel Arellano (CEMFI - Madrid)

May 18, 2021, 15:30–16:50

Zoom

Econometrics and Empirical Economics Seminar

Abstract

In this paper we use administrative data from the social security to study income dynamics and income risk inequality in Spain between 2005 and 2018. We construct individual measures of income risk as functions of past employment history, income, and demographics. We document that income risk is highly unequal in Spain: more than half ofthe economy has close to perfect predictability of their income, while some face considerable uncertainty. Income risk is inversely related to income and age, and income risk inequality increases markedly in the recession. These findings are robust to a variety ofspecifications, including using neural networks for prediction, and allowing for individual unobserved heterogeneity.