The life-cycle and the business-cycle of wage risk — Cross-country comparisons

Abstract

We provide evidence on life-cycle and business-cycle fluctuations in the dispersion of household-level wage innovations, comparing the US, the UK, and Germany. First, we find that household characteristics explain about 25% of the dispersion in wages within an age group in all three countries. Second, the cross-sectional variance of wages is almost linearly increasing in household age in all three countries, but with increments being smaller in the European data. Third, wage risk is procyclical in Germany while it is countercyclical in the US and acyclical in the UK.