Asymmetries in aggregate income risk over the business cycle: evidence from administrative data of Argentina

Abstract

This paper explores the aggregate and systematic income risk of formal workers in Argentina, using an extensive longitudinal database that contains information on approximately half a million formal employees in the private sector throughout the country for a span of twenty years (1996-2015). We estimate quantile regression models to measure the sensitivity of remunerations to business cycle along the conditional and unconditional distribution of salaries, thus capturing the asymmetry of economic activity impacts on workers’ remunerations. The main result is that income risk decreases along the conditional and unconditional distribution of salaries, showing that individuals located at the lower part of the distribution are more exposed to the fortunes of the aggregate economy. One important factor that probably explains this asymmetry is given by the role of the unions. On the other hand, unconditional poor individuals are not only more affected by business cycle fluctuations, but they suffer a stronger fall in wages when activity declines than the increase that their experiment when business cycle is in its expansion phase. We also detect some interesting specificities, since individuals that work in Construction sector face a higher income risk, while workers’ remunerations of large companies are less sensitive to business cycle.