Income Risk Inequality: Evidence from Spanish Administrative Records

Arellano, Manuel; Bonhomme, Stephane; De Vera, Micole; Hospido, Laura; Wei, Siqi

doi:10.2139/ssrn.3938045

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Income Risk Inequality: Evidence from Spanish Administrative Records

Banco de Espana Working Paper No. 2136

98 Pages Posted: 8 Oct 2021

See all articles by Manuel Arellano

Siqi Wei

David Nazarian College of Business and Economics, California State University, Northridge

Date Written: October 7, 2021

Abstract

In this paper we use administrative data from the social security to study income dynamics and income risk inequality in Spain between 2005 and 2018. We construct individual measures of income risk as functions of past employment history, income, and demographics. Focusing on males, we document that income risk is highly unequal in Spain: more than half of the economy has close to perfect predictability of their income, while some face considerable uncertainty. Income risk is inversely related to income and age, and income risk inequality increases markedly in the recession. These findings are robust to a variety of specifications, including using neural networks for prediction and allowing for individual unobserved heterogeneity.

Keywords: Spain, income dynamics, administrative data, income risk, inequality

JEL Classification: D31, E24, E31, J31

Suggested Citation: Suggested Citation

Arellano, Manuel and Bonhomme, Stephane and De Vera, Micole and Hospido, Laura and Wei, Siqi, Income Risk Inequality: Evidence from Spanish Administrative Records (October 7, 2021). Banco de Espana Working Paper No. 2136, Available at SSRN: https://ssrn.com/abstract=3938045 or http://dx.doi.org/10.2139/ssrn.3938045