American Economic Review: Vol. 104 No. 5 (May 2014)

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How Risky Are Recessions for Top Earners?

Article Citation

Guvenen, Fatih, Greg Kaplan, and Jae Song. 2014. "How Risky Are Recessions for Top Earners?" American Economic Review, 104(5): 148-53.

DOI: 10.1257/aer.104.5.148

Abstract

How sensitive to business cycles are the earnings of top earners? And, how does the business cycle sensitivity of top earners vary by industry? We use a confidential dataset on earnings histories of US males from the Social Security Administration. On average, individuals in the top 1 percent of the earnings distribution are slightly more cyclical than the population average. But there are large differences across sectors; top earners in Finance, Insurance, and Real Estate (FIRE) and Construction face substantial business cycle volatility, whereas those in Services (who make up 40 percent of individuals in the top 1 percent) have earnings that are less cyclical than the average worker.

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Authors

Guvenen, Fatih (U MN)
Kaplan, Greg (Princeton U)
Song, Jae (US Social Security Administration)

JEL Classifications

E32: Business Fluctuations; Cycles
J31: Wage Level and Structure; Wage Differentials


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