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Journal Article

Can households and welfare states mitigate rising earnings instability?

Authors

Publication date

Jun 2013

Summary

We compare the evolution of earnings instability in Germany and the United Kingdom, two countries which stand for different types of welfare states. Deploying data from the German Socio-Economic Panel (SOEP) and the British Household Panel Survey (BHPS), we estimate permanent and transitory variances of male income over the period 1984-2009 and 1991-2006, respectively. Studies in this literature generally use individual labor earnings. To uncover the role of welfare state and households in smoothening earnings shocks, we compute different income concepts ranging from gross earnings to net equivalent household income. We find evidence that the overall inequality of earnings in Germany and the United Kingdom has been rising throughout the period due to both higher permanent earnings inequality and higher earnings volatility. However, taking institutions of the welfare state and risk-sharing households into account, we find that the volatility of net household income has remained fairly stable. Furthermore, redistribution and risk insurance provided by the welfare state is more pronounced in Germany than in the United Kingdom.

Published in

Review of Income and Wealth

Volume and page numbers

59 , 250 -282

DOI

http://dx.doi.org/10.1111/j.1475-4991.2012.00497.x

ISSN

16

Subjects

Households, Welfare Benefits, and Wages And Earnings

Links

http://serlib0.essex.ac.uk/record=b1588073~S5

Notes

Albert Sloman Library Periodicals *restricted to Univ. Essex registered users*

#521650


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