The B.E. Journal of Macroeconomics
Editor-in-Chief: Cavalcanti, Tiago / Kambourov, Gueorgui
Ed. by Abraham, Arpad / Carceles-Poveda , Eva / Debortoli, Davide / Lambertini, Luisa / Nimark, Kristoffer / Schwartzman, Felipe / Wang, Pengfei
IMPACT FACTOR 2017: 0.378
5-year IMPACT FACTOR: 0.462
CiteScore 2017: 0.62
SCImago Journal Rank (SJR) 2017: 0.553
Source Normalized Impact per Paper (SNIP) 2017: 0.605
Life Cycle Dynamics of Income Uncertainty and Consumption
We propose a method for estimating household income uncertainty that does not impose restrictions on the underlying income shocks or assumptions about household behaviors. We measure income uncertainty as the variance of linear projection errors at various future horizons, up to 25 years ahead, conditional on only the information available to households when the projection is made. Our uncertainty estimates change substantially over the life cycle. We calibrate an income process to match our estimates, allowing the variances of both transitory and persistent shocks to change over the life cycle. Relative to previous studies, we find lower and less persistent income uncertainties that call for a life cycle consumption profile with a less pronounced hump.
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