The contribution of income mobility to economic insecurity in the US and Spain during the Great Recession

Working Paper 2014-345

Abstract

Recent evidence on the impact of the crisis on developed countries shows that the changes in income inequality and poverty have been relatively small in spite of the macroeconomic heterogeneity of the recession across different economies. However, when evaluating the main changes in individual perceptions linked to the crisis not only increases in inequality or poverty matter, also changes in individually-perceived chances to scale up or lose ground in the income ladder are crucial. Our aim is to analyze to what extent the recession may have had an impact on economic insecurity perceptions by increasing income losses in two developed countries where job losses have been large. The contribution of income losses to insecurity is approximated by the prevalence of downward income mobility. We identify the main socioeconomic characteristics of those most likely to suffer from a large income loss. In general, age, education and the presence of children in the household are key determinants of this event in both countries.

Authors: Olga Canto, David O. Ruiz.