01 Jan 04

An anatomy of household income volatility in European countries.

Authors: VAN KERM Philippe.

Abstract: This paper offers an exploratory analysis of household income volatility in the 1990s in fourteen EU countries and two future member states, namely Hungary and Poland, using simple summary statistics for average income changes as advocated in Fields and Ok (JET 1996, Economica 1999). The evidence is derived from the newly generated data of the Consortium of Household Panels for European Socio-Economic Research (CHER) that contain harmonised data from the European Community Household Panel and from a series of independent panel surveys. Going a step ahead to overcome the obvious restriction of looking only at population averages as Fields and Ok suggest, both the overall distribution of individual income variations, and the variations in levels of income volatility for different starting income levels are also examined. The analysis can be viewed as looking at the primitives of income mobility at the individual level, as opposed to many of the existing analyses that assess, using other more sophisticated concepts, the aggregate outcome (like inequality of long-term income) resulting from these individual income variations.

Reference: VAN KERM Philippe. An anatomy of household income volatility in European countries. CEPS/INSTEAD, 2004, CHER Working Papers n°16.