Working Paper: NBER ID: w19864
Authors: Fatih Guvenen; Greg Kaplan; Jae Song
Abstract: How sensitive are the earnings of top earners to business cycles? And, how does the business cycle sensitivity of top earners vary by industry? We use a confidential dataset on earnings histories of US males from the Social Security Administration. On average, individuals in the top 1% of the earnings distribution are slightly more cyclical than the population average. But there are large differences across sectors: Top earners in Finance, Insurance, and Real Estate (FIRE) and Construction face substantial business cycle volatility, whereas those in Services (who make up 40% of individuals in the top 1 percent) have earnings that are less cyclical than the average worker.
Keywords: Earnings; Top Earners; Business Cycles; Income Inequality
JEL Codes: E21; G12; J31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Top earners' earnings fluctuations (J31) | Bottom 99 percent earnings fluctuations (E32) |
| Sectoral dynamics (L52) | Earnings volatility for top earners (J31) |
| Cyclical earnings growth for top earners in services (O49) | Cyclical earnings growth for bottom 99 percent (E32) |
| Business cycle sensitivity (E32) | Earnings growth (O49) |
| Earnings volatility for top earners (J31) | Earnings fluctuations (E32) |