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Income Business Cycles

Discussion Papers 1964, 19 S.

Geraldine Dany-Knedlik, Alexander Kriwoluzky, Sandra Pasch


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Using a wide variety of business cycle dating and filtering techniques, this paper documents the cyclical behavior of the post-tax income distribution in the US. First, all incomes are cyclical and co-move with the business cycle. Second, lower and higher income individuals experience significantly larger fluctuations across the business cycle than middle-income individuals. Third, these fluctuations have become smaller over the course of the Great Moderation for the bottom and the very top income individuals. With the financial crisis starting in 2009 and its repercussions, the volatilities are again increasing; however, not significantly. These findings are independent from the method to extract the business cycle component.

Alexander Kriwoluzky

Head of Department in the Macroeconomics Department

Geraldine Dany-Knedlik

Head of Forecasting and Economic Policy in the Macroeconomics Department

JEL-Classification: E01;E32;D31
Keywords: Cyclicity of the income distribution, business cycle
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