Family background and life cycle earnings volatility: evidence from brother correlations in Denmark, Germany, and the United States

Abstract

While stratification scholars have extensively examined intergenerational associations in lifetime income, they have mostly disregarded how family background affects exposure to income volatility over the life course. As exposure to volatility represents a non-desirable outcome associated with negative shocks to individuals’ welfare, studying the link between family background and volatility is key to further advancing the understanding of how family-based inequalities impact lifelong economic prospects. This article fills this gap by providing a comprehensive analysis of the role of family background in shaping exposure to earnings volatility across the life course in Denmark, Germany, and the United States. We find that brother correlations in volatility exposure—a broad measure of family background’s impact—are much lower in Denmark than in Germany and the United States. Further analyses indicate that in Germany and the United States, family background exerts a considerable influence particularly around the period of occupational maturity, while in Denmark, its impact remains consistent over time. We also find that family background impacts volatility exposure net of individuals’ position in the overall earnings distribution, indicating that family background has a direct impact on volatility experiences and thus constitutes a nonnegligible component in intergenerational inequality.