Earnings Risk in the Household: Evidence from Millions of U.S. Tax Returns (WP) w/ Turner

with N. Turner

SSRN

Do households with multiple working-age adults ameliorate the primary earner’s labor market risk? We answer the question using detailed administrative data from the IRS. Households face substantially less skewness risk than male earnings alone, and face roughly half the countercyclical increase in risk. Since the household is the key decision-maker in many economic models, it is important to demonstrate the extent to which primary labor earnings risk translates into risk at the household level.