Guvenen, Fatih; McKay, Alisdair; Ryan, Conor B. - National Bureau of Economic Research - 2023
We estimate an income process that is consistent with key facts on individual income risk and its variation over the … business cycle. In particular, the estimated process generates income fluctuations that display (i) flat and acyclical variance … over the life cycle, all consistent with the US data. Furthermore, the income process captures the predictable nature of …