Selected Research

1. Wage Shocks, Household Labor Supply, and Income Instability Revise and resubmission at Journal of Population Economics

Do married couples make joint labor supply decisions in response to each other’s wage shocks? The study of this question aids in understanding the link between the rising income instability and household decisions. Existing studies on household insurance either focus on consumption smoothing and take labor supply as a given, or only focus on wives’ labor responses to husbands’ unemployment shocks. This article develops an intra-household insurance model based on the collective framework, which allows for insurance against both permanent and transitory wage shocks from both partners.  Estimation using Survey of Income and Program Participation shows that individuals increase labor supply in response to spouse’s adverse wage shocks and such labor supply responses are larger when shocks are permanent than transitory. This intra-household insurance reduces earnings instability by about four to ten percent. These results suggest that joint labor supply decisions provide an extra smoothing effect on shocks to earnings and household income

2. Increases in Family Income Inequality and Instability--The Importance of Changes in Covariances across Income Sources, with Peter Gottschalk and Robert Moffitt, in progress

The increases in the transitory fluctuations in head's earnings and in family income are well documented. While the increased instability of head's earnings surely contributed to the rise in family income instability, this is but one potential factor. The distribution of the transitory component of family income is the result of changes in the joint distribution of all sources of family income. This paper provides a consistent framework for estimating changes the marginal distributions of the permanent and transitory components of each income source and changes in the covariances across each pair of income sources.

We use the Panel Study of Income Dynamics 1970-2008 to estimate the covariance structure of head's earning, spouses’ earnings and a residual category that includes other public and private non-labor income. The increase in the transitory component of head's earnings was an important factor behind the rise in family income instability. However, the increase in the covariance in the transitory component across income sources also played a significant role. Transitory declines in head's earnings were largely offset by increases in other sources of income in the 1970's and 1980's.  By the 1990's, transitory declines in head's earnings were largely reinforced by declines in other sources of income.

3. Do Racial Disparities in Private Transfers Help Explain the Racial Wealth Gap? New Evidence from Longitudinal Data, with Signe-Mary McKernan, Caroline Ratcliffe, and Margaret Simms, under review

How do private transfers differ by race and ethnicity and do such differences explain the racial and ethnic disparity in wealth? Using the Panel Study of Income Dynamics, this study examines private transfers by race and ethnicity in the United States and explores a causal relationship between private transfers and wealth. Our empirical approach uses panel data and a family-level fixed effect model to control for the endogeneity of private transfers. We examine private transfers in the form of financial support received and given from extended families and friends, as well as large gifts and inheritances. Our findings highlight important differences in private transfers by race and ethnicity: African Americans and Hispanics (both immigrant and non-immigrant) receive less in private transfers than non-Hispanic whites. Private transfers in the form of large gifts and inheritances (but not net support received) are importantly related to increases in wealth overall and for whites and black non-Hispanics. In total, we estimate that the African American shortfall in large gifts and inheritances accounts for 12 percent of the white-black racial wealth gap.

4. How Much Does the Supplemental Nutrition Assistance Program Reduce Food Insecurity? with Caroline Ratcliffe and Signe-Mary McKernan. American Journal of Agricultural Economics, 93(4): 1082-98, July 2011

Nearly 15% of all U.S. households and 40% of near-poor households were food insecure in 2009. The Supplemental Nutrition Assistance Program (SNAP) is the cornerstone of federal food assistance programs and serves as the first line of defense against food-related hardship. This paper measures the effectiveness of SNAP in reducing food insecurity using an instrumental variables approach to control for selection. Our results suggest that receipt of SNAP benefits reduces the likelihood of being food insecure by roughly 30% and reduces the likelihood of being very food insecure by 20%.

5. Recent Trends in Household Income Dynamics for the U.S., West Germany and the U.K.Economic Bulletin 30(2): 1154-72, May 2010

This paper examines the recent trends in household income volatility in the United States, Germany and Great Britain, and compares household income volatility with individual income volatility. I estimate a formal error components model using the Cross-national Equivalence File from 1979 to 2004. I find that household income volatility, measured by the transitory variance of household income, accounts for more than half of the total income variance for all three countries. Despite the differences in the total household income variances among the three countries, the permanent variances converges since the late 1990s.