Oil price shocks and household heterogeneity: the income side

We provide evidence on the transmission of oil price movements to individual incomes for a large oil-importing economy. To do so, we trace the footprint of oil price surprises on the income elements of a representative household panel for Germany. An inflationary oil price shock persistently increases the likelihood of unemployment and leads to a sticky decline in contracted labour incomes even though hours worked remain unaffected. These responses are underlined by marked heterogeneity: more vulnerable household groups (namely, the young, less educated, and those with lower incomes) are more affected overall. Our results also highlight the importance of general equilibrium effects since the responses do not depend on the oil intensity of employment sectors.