Rising Income Risk at the Top / J. Carter Braxton, Kyle F. Herkenhoff, Chengdai Huang, Michael Nattinger, Jonathan L. Rothbaum, Lawrence D.W. Schmidt.

Format:

Book

Author/Creator:

Braxton, J. Carter.

Contributor:

Herkenhoff, Kyle F.

Huang, Chengdai.

Nattinger, Michael.

Rothbaum, Jonathan L.

Schmidt, Lawrence D.W.

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w35664.

NBER working paper series no. w35664

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2026.

Summary:

We document an increase in U.S. income risk from 1969 to 2019 using newly digitized IRS tax returns, distinguishing permanent from transitory risk. Since the 1970s, permanent income risk increased across the distribution, but most sharply among high earners, rising nearly 70% among the top 5%. We show that, even among top earners, large negative income shocks strongly predict financial distress and higher income risk is linked with higher savings. In a quantitative life-cycle model, rising income risk concentrated at the top lowers the risk-free rate by 0.7pp, increases wealth inequality, and contributes to the "savings glut of the rich."

Notes:

August 2026.

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