This paper concerns the decomposition of income risk into permanent and transitory components using repeated cross-section data on income and consumption. Our focus is on the detection of changes in the magnitudes of variances of permanent and transitory risks. A new approximation to the optimal...

We develop a new approach to the decomposition of income risk within a nonstationary model of intertemporal choice. The approach allows for changes in income risk over the life-cycle and with the business cycle. It requires only repeated cross-section data and can allow for mixtures of...