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Income mobility, dynamics and risk over the working life: income insurance from taxes and cash transfers in 2001–2008

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  • Ilpo Suoniemi

    (Palkansaajien tutkimuslaitos)

Abstract

Register based Finnish panel data are used to examine income risk in the working age population. The paper considers the extent of risk reduction due to the tax-benefit system which is measured by successive differences between risk premia of factor, gross and disposable household income. Income risk has been estimated using a forward looking dynamic model for income mobility (deviations of log income from sub-population means) over a population strata by age, educational and socio-economic status. The population groups having relatively high labour/factor market risk seem to benefit most from the implicit income insurance provided by the public sector. The role of direct taxes is substantially lower than that of public cash transfers. The results based on the dynamic model are quite similar to those which are based on observed ex post values. The findings are qualitatively robust to a particular value of the degree of risk aversion assumed.

Suggested Citation

  • Ilpo Suoniemi, 2015. "Income mobility, dynamics and risk over the working life: income insurance from taxes and cash transfers in 2001–2008," Working Papers 300, Työn ja talouden tutkimus LABORE, The Labour Institute for Economic Research LABORE.
    • Handle: RePEc:pst:wpaper:300
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    References listed on IDEAS

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    More about this item

    Keywords

    risk-premium; social protection; redistribution; age;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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