Nicholas Rohde - Welfare-Based Measures of Income Insecurity
Melbourne Institute Seminar Series
Melbourne Institute Seminar Room
Room 6.05, FBE Building
111 Barry St, Carlton
Title: Welfare-Based Measures of Income Insecurity
Abstract: This paper develops normative approaches for measuring individual-level income insecurity. Using concepts derived from Expected Utility Theory and Prospect Theory, we build a suite of measures designed to capture various forms of potentially psychologically distressing income risk. We present an application for the US and Germany from 1993-2013 using conditionally heteroskedastic fixed-effects models that generate predictive densities for future incomes. Our results reveal much higher levels of income risk in the US, which can be mostly attributed to a higher level of autonomous, time-invariant volatility. Variations in political administrations partially explain our results, while copula-based counterfactual estimations reveal that changes in labor markets also account for increases in risk over time.
Presenter: Nicholas Rohde, Griffith Business School, Griffith University
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