Income Volatility and Mobility: U.S. Income Tax Data, 1999-2007
Diamond, John W.
income mobility; income volatility; income inequality; income distribution
How do earnings volatility and mobility impact different income groups? We describe household earnings volatility by the full distribution of percent earnings changes and contrast measures of relative and absolute mobility using a panel of U.S. income tax returns from 1999 to 2007. While earnings volatility looks similar across most of the income distribution, we find more volatility among the bottom quintile of households, mostly from earnings gains, and more volatility among the top one percent, mostly from earnings losses. Large earnings gains persist more for the bottom quintile and large losses persist more for households higher up the income distribution. In contrast to typical findings of lower relative mobility among the bottom and top quintiles, we find higher absolute earnings mobility among households at the extremes of the distribution.