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 … shocks have greater relevance. Progressive taxation strongly attenuates cross-sectional earnings risk, its life …

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 … show that in a standard incomplete-markets life-cycle model, first, higher-order risk has sizable welfare implications …

We provide a comprehensive analysis of income inequality and income dynamics for Germany over the last two decades …. Combining personal income tax and social security data allows us – for the first time – to offer a complete picture of the … German labor market and increasing labor supply. In the second part of the paper, we study the distribution of total income …

income tax have been discussed at length. What has been missing in the literature so far, however, is a systematic account of …-linear version of the model, and draws a comparison with the existing income tax. The model simulations show that the two tax systems … income tax, for all the demand shocks considered. The PET yields welfare losses, however, under a supply shock. …