What Determines Earnings and Employment Risk?

36 Pages Posted: 31 Dec 1998

See all articles by Luigi Guiso

Luigi Guiso

Einaudi Institute for Economics and Finance (EIEF); Einaudi Institute for Economics and Finance

Tullio Jappelli

University of Naples Federico II - Department of Economics and Statistics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Center for Studies in Economics and Finance - CSEF; CSEF - University of Naples Federico II - Centre for Studies in Economics and Finance (CSEF)

Luigi Pistaferri

Centre for Economic Policy Research (CEPR); Stanford University

Date Written: December 1998

Abstract

Expectations and riskiness of future earnings are crucial determinants of individuals' intertemporal choices. Yet, the empirical literature lacks reliable measures of the distribution of future income. Lacking direct observability, the latter is usually estimated inferring the mean, the variance and other moments of the distribution from income realizations on panel data. In this paper we rely instead on subjective expectations available in the 1995 Survey of Household Income and Wealth, a large random sample representative of Italian households. The survey elicits information on the distribution of future earnings and the probability of employment in a very simple and parsimonious way. Based on the responses, we estimate the individual distributions of expected earnings conditional on working as well as unconditional. We can then relate various moments of these distributions to demographic and economic variables observable in the cross-section.

JEL Classification: E21, J31

Suggested Citation

Guiso, Luigi and Guiso, Luigi and Jappelli, Tullio and Pistaferri, Luigi and Pistaferri, Luigi, What Determines Earnings and Employment Risk? (December 1998). Available at SSRN: https://ssrn.com/abstract=142812 or http://dx.doi.org/10.2139/ssrn.142812

Luigi Guiso (Contact Author)

Einaudi Institute for Economics and Finance (EIEF) ( email )

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Einaudi Institute for Economics and Finance ( email )

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rome, 00187
Italy

Tullio Jappelli

University of Naples Federico II - Department of Economics and Statistics ( email )

Via Cintia - Monte S. Angelo
Napoli, 80126
Italy

HOME PAGE: http://www.csef.it/people/jappelli.htm

Centre for Economic Policy Research (CEPR)

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United Kingdom

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European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
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Belgium

HOME PAGE: http://www.ecgi.org

Center for Studies in Economics and Finance - CSEF ( email )

Via Cintia - Monte S. Angelo
Napoli, 80126
Italy

HOME PAGE: http://www.csef.it/people/jappelli.htm

CSEF - University of Naples Federico II - Centre for Studies in Economics and Finance (CSEF) ( email )

Via Cintia
Complesso Monte S. Angelo
Naples, Naples 80126
Italy

HOME PAGE: http://www.csef.it/people/jappelli.htm

Luigi Pistaferri

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Stanford University ( email )

Stanford, CA 94305
United States