Cyclical labour income risk in Great Britain

Angelopoulos, K. , Lazarakis, S. and Malley, J. (2022) Cyclical labour income risk in Great Britain. Journal of Applied Econometrics, 37(1), pp. 116-130. (doi: 10.1002/jae.2860)

Abstract

This paper provides new evidence on the cyclical behaviour of household labour income risk in Great Britain and the role of social insurance policy in mitigating against this source of income risk. To achieve this, we decompose stochastic idiosyncratic household income into its transitory and persistent components. We focus our analysis of income risk captured by the second to fourth moments of the probability distribution of shocks to the persistent component of income. We find that household labour income risk increases during contractions via changes in third and fourth central moments of persistent shocks to labour income, while the variance remains acyclical. We also find that economic policy has reduced the level of risk exposure and its increase during contractions via benefits rather than tax policies.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Malley, Professor Jim and Lazarakis, Mr Spyridon and Angelopoulos, Dr Konstantinos
• Authors: Angelopoulos, K., Lazarakis, S., and Malley, J.
• College/School: College of Social Sciences > Adam Smith Business School > Economics
• Journal Name: Journal of Applied Econometrics
• Publisher: Wiley
• ISSN: 0883-7252
• ISSN (Online): 1099-1255
• Published Online: 20 July 2021
• Copyright Holders: Copyright © 2021 The Authors
• First Published: First published in Journal of Applied Econometrics 37(1): 116-130
• Publisher Policy: Reproduced under a Creative Commons License

Project Code	Award No	Project Name	Principal Investigator	Funder's Name	Funder Ref	Lead Dept
190423		ESRC Doctoral Training Centre 2011...	Mary Beth Kneafsey	Economic and Social Research Council (ESRC)	ES/J500136/1	Research and Innovation Services