Distributional Characteristics of Income Insecurity in the U . S ., G ermany, and B ritain

• Published in: The Review of income and wealth 2014-05, Vol.60 (S1)
• Main Authors: Rohde, Nicholas, Tang, Kam Ki, Rao, D.S. Prasada
• Format: Article
• Language: English
• ISSN: 0034-6586; 1475-4991
• DOI: 10.1111/roiw.12089

This paper studies income volatility using recent data from the C ross N ational E quivalence F ile ( CNEF ). Measures of downward instability are applied to household income streams and the results are interpreted as indicators of income insecurity. Using this method we examine (i) cross national differences in average insecurity levels, (ii) the effects of taxes and transfers, and (iii) relationships between the insecurity index and household income. Insecurity estimates based on pre‐government incomes are highest in B ritain and lowest in G ermany, however results for post‐government incomes are highest in the U . S . It is also shown that insecurity estimates based upon pre‐government incomes are heavily concentrated at the lower end of the distribution; although governments are effective at smoothing the income streams of these households. We also search for determinants of our measure and find that gender, household size, health status, and industry affiliations of the household head are the most significant covariates.