Skewed Idiosyncratic Income Risk over the Business Cycle: Sources and Insurance

We provide new evidence on business cycle fluctuations in skewed labor income risk the United States, Germany, Sweden, and France. document four results. First, all countries, skewness of individual growth is strongly procyclical, whereas its variance flat acyclical. Second, this result also holds for continuously employed, full-time workers, indicating that hours margin not main driver; additional analyses wages confirm both margins are important. Third, within-household smoothing does seem effective at mitigating fluctuations. Fourth, tax-and-transfer policies blunt some largest declines incomes, reducing procyclical skewness. (JEL E23, E24, E32, H24, I38, J22, J31)