Working Paper: NBER ID: w19699
Authors: Jeff Larrimore; Richard V. Burkhauser; Philip Armour
Abstract: With data from the March CPS and using shift-share analysis, we analyze the factors that account for changes in post-tax post-transfer income during each of the past four recessions. What distinguishes the Great Recession is that drops in employment rather than wage earnings drove income declines. In addition, taxes and transfers played a much greater role in offsetting market income losses --a result largely missed in analyses that do not account for taxes and transfers. This is particularly so among the bottom quintile of the distribution where lower and increased transfers offset more than one-half of the market income declines.
Keywords: income changes; Great Recession; taxes; transfers
JEL Codes: D31; H24; J3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| significant drop in employment (J63) | income declines (E25) |
| public tax policies (H29) | offset market income declines (E25) |
| public transfers (H87) | stabilize median post-tax income trends (D31) |
| tax reductions and credits (H23) | mitigate income declines (J65) |