Abstract
This study estimates income risk observed among the elderly using the Korean Retirement and Income Study data. In order to decompose household income into permanent and transitory components, the quantile-based panel data framework is employed. The permanent component is assumed to follow a first-order Markov process, and the transitory component is assumed to be independent over time and also independent of the persistent components. I estimate the income persistence from the estimated permanent income component, and analyze the dynamic effects of permanent income shocks on income through simulations. The results show the presence of nonlinear persistence in the household income of the elderly. Furthermore, it is observed that the dynamic effects of permanent income shocks vary depending on the past income history. These findings differ from studies focused on the age groups participating in the labor market. In particular, the permanent income shocks have a significant impact on the income of elderly households. In particular, the permanent income shocks have a significant impact on the income of elderly households.
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