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Worker Betas: Five Facts about Systematic Earnings Risk

Fatih Guvenen, Sam Schulhofer-Wohl, Jae Song, Motohiro Yogo

NBER Working Paper No. 23163
Issued in February 2017, Revised in April 2017
NBER Program(s):The Asset Pricing Program, The Economic Fluctuations and Growth Program, The Industrial Organization Program, The Labor Studies Program, The Monetary Economics Program, The Public Economics Program

The magnitude of and heterogeneity in systematic earnings risk has important implications for various theories in macro, labor, and financial economics. Using administrative data, we document how the aggregate risk exposure of individual earnings to GDP and stock returns varies across gender, age, the worker’s earnings level, and industry. Aggregate risk exposure is U-shaped with respect to the earnings level. In the middle of the earnings distribution, aggregate risk exposure is higher for males, younger workers, and those in construction and durable manufacturing. At the top of the earnings distribution, aggregate risk exposure is higher for older workers and those in finance. Workers in larger employers are less exposed to aggregate risk, but they are more exposed to a common factor in employer-level earnings, especially at the top of the earnings distribution. Within an employer, higher-paid workers have higher exposure to the employer-level risk than lower-paid workers.

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Document Object Identifier (DOI): 10.3386/w23163

Published: Fatih Guvenen & Sam Schulhofer-Wohl & Jae Song & Motohiro Yogo, 2017. "Worker Betas: Five Facts about Systematic Earnings Risk," American Economic Review, American Economic Association, vol. 107(5), pages 398-403, May. citation courtesy of

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