We extend the canonical income process with persistent and transitory risk to shock distributions with left …-skewness and excess kurtosis, to which we refer as higher-order risk. We estimate our extended income process by GMM for household … data from the United States. We find countercyclical variance and procyclical skewness of persistent shocks. All shock …

Using German panel data, we assess the causal effect of job loss, and thus of an extensive income shock, on risk … attitude. In line with predictions of expected utility reasoning about absolute risk aversion, losing oneś job reduces the … perceives the threat of job loss and is of a transitory nature. The change in stated risk attitude matches observable job …

-cycle insurance impact is much smaller. At the mean, a positive hours shock of one standard deviation raises life-time income by 10 …We decompose permanent earnings risk into contributions from hours and wage shocks. To distinguish between hours shocks …-cycle model of consumption and labor supply. Both permanent wage and hours shocks are important to explain earnings risk, but wage …