Trends in Income Volatility and Risk, 1970-2004

Research Report

Trends in Income Volatility and Risk, 1970-2004

Abstract

Public concern about economic insecurity has increased markedly over the last several decades. This paper assesses the extent to which this increase in concern has in fact coincided with increased risk to family income. Using data from the Panel Study of Income Dynamics, we examine changes in two indicators of income risk-the short-term variability (volatility) of family income, and the association between large income drops and destabilizing life events-over the 1970-2004 period. Our findings support the hypothesis that income risk has increased: the volatility of family income nearly doubled over the period, and destabilizing events became increasingly associated with large income drops.

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