Hybrid seminar: The Effect of Adverse Life-Events on Income Trajectories

This paper studies and compares the effect of different adverse life events - job loss, disability and health shocks, divorce and spousal death - on individuals' income trajectories. We use an harmonized design in terms of methodology (matching difference-in-difference) and data (exhaustive Dutch administrative registers) across events. We compare their effect on primary and disposable household income in order to measure the public insurance to the shocks provided by the tax and transfer system. Both between different events and within different groups for a given event, we find that the importance of government insurance increases with the initial severity of the event. However, we find that certain groups of the population are relatively less protected against adverse life events, such as young people facing a large health shock or divorced individuals who earned less than their spouse.