Earnings dynamics are much richer than typically assumed in macro models with heterogeneous agents. This holds for individual-pre-tax and household-post-tax earnings and across administrative (Social Security Administration) and survey (Panel Study of Income Dynamics) data. We study the...

The desirability, efficacy, and cost-effectiveness of government welfare policies depend crucially on the income risk that households face and the actions that they can take to reduce consumption fluctuations, for instance by adjusting their saving and labor supply. Shocks to labour earnings are...