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Creators/Authors contains: "Hryshko, Dmytro"

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  1. We identify two sets of households in the Panel Study of Income Dynamics (PSID) differing dramatically in their income and consumption dynamics, although both should be equally representative. The degree of consumption insurance in each subsample is consistent with the standard incomplete-markets model’s prediction. We contrast PSID and administrative earnings data and study the patterns in international datasets modeled on the PSID. We find an important role of differential attrition based on the dynamic properties of incomes in inducing the differences and identify PSID households providing a better guide to income dynamics and consumption insurance in the U.S. 
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  2. Abstract Empirically, earnings at the start or end of earnings spells are lower and more volatile than in the interior of earnings histories, reflecting mainly the effects of working less than the full year. Ignoring these properties leads to a mismeasurement of the permanent and transitory shock variances and induces the large and widely documented divergence in the estimates of those variances based on fitting the earnings moments in levels or growth rates. Accounting for these effects enables more accurate analysis using quantitative models with permanent and transitory earnings risk and improves empirical estimates of consumption insurance against permanent earnings shocks. 
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