We study the drivers of financial distress using a large-scale field experiment that offered randomly selected borrowers a combination of (i) immediate payment reductions to target short-run liquidity write-downs to target long-run debt constraints. We identify the separate effects of the payment reductions and interest write-downs using both the experiment and cross-sectional variation in treatment intensity. We find that the interest write-downs significantly improved both financial and labor market outcomes, despite not taking effect for three to five years. In sharp contrast, there were no positive effects of the more immediate payment reductions. These results run counter to the widespread view that financial distress is largely the result of short-run constraints. (JEL G56, K35)

Consumer bankruptcy is one of the largest social insurance programs in the United States, but little is known about its impact on debtors. We use 500,000 bankruptcy filings matched to administrative tax and foreclosure data to estimate the impact of Chapter 13 bankruptcy protection on subsequent outcomes. Exploiting the random assignment of bankruptcy filings to judges, we find that Chapter 13 protection increases annual earnings by $5,562, decreases five-year mortality by 1.2 percentage points, and decreases five-year foreclo-sure rates by 19.1 percentage points. These results come primarily from the deterioration of outcomes among dismissed filers, not gains by granted filers. (JEL D14, I12, J22, J31, K35)

How sensitive to business cycles are the earnings of top earners? And, how does the business cycle sensitivity of top earners vary by industry? We use a confidential dataset on earnings histories of US males from the Social Security Administration. On average, individuals in the top 1 percent of the earnings distribution are slightly more cyclical than the population average. But there are large differences across sectors; top earners in Finance, Insurance, and Real Estate (FIRE) and Construction face substantial business cycle volatility, whereas those in Services (who make up 40 percent of individuals in the top 1 percent) have earnings that are less cyclical than the average worker.

Longitudinal administrative data show that rejected male applicants to the Disability Insurance (DI) program who are younger or have low-mortality impairments such as back pain and mental health problems exhibit substantial labor force attachment. While we confirm that employment rates of older rejected applicants are low, continued high numbers of younger and low-mortality beneficiaries have raised the potential employment of DI beneficiaries. Three findings support economic inducement to apply. Mean preapplication earnings have fallen, rejected applicants experience preapplication declines in earnings, and beneficiaries whose first applications were rejected at the DDS level but who ultimately received benefits exhibit substantial employment. JEL: H55, J14, J28, J31

This paper uses Social Security Administration longitudinal earnings micro data since 1937 to analyze the evolution of inequality and mobility in the United States. Annual earnings inequality is U-shaped, decreasing sharply up to 1953 and increasing steadily afterward. Short-term earnings mobility measures are stable over the full period except for a temporary surge during World War II. Virtually all of the increase in the variance in annual (log) earnings since 1970 is due to increase in the variance of permanent earnings (as opposed to transitory earnings). Mobility at the top of the earnings distribution is stable and has not mitigated the dramatic increase in annual earnings concentration since the 1970s. Long-term mobility among all workers has increased since the 1950s but has slightly declined among men. The decrease in the gender earnings gap and the resulting substantial increase in upward mobility over a lifetime for women are the driving force behind the increase in long-term mobility among all workers.

We study business cycle variation in individual earnings risk using a confidential and very large data set from the US Social Security Administration. Contrary to past research, we find that the variance of idiosyncratic shocks is not countercyclical. Instead, it is the left-skewness of shocks that is strongly countercyclical: during recessions, large upward earnings movements become less likely, whereas large drops in earnings become more likely. Second, we find that the fortunes during recessions are predictable by observable characteristics before the recession. Finally, the cyclicality of earnings risk is dramatically different for the top 1 percent compared with the rest of the population.

We use the draft lottery to construct instrumental variables (IV) estimates of the impact of Vietnam-era military service on veterans' Social Security (SSA) earnings through 2007. We also use SSA data to construct IV estimates for employment (as measured by an indicator for positive earnings) and disability status (as measured by an indicator for social security disability program application). New findings for recent years show surprisingly rapid convergence in veteran and nonveteran earnings: by the early 1990s, there was no longer a substantial Vietnam-era conscription penalty. The IV estimates also show no effect on employment or disability rates.

The magnitude of and heterogeneity in systematic earnings risk has important implications for various theories in macro, labor, and financial economics. Using administrative data, we document how the aggregate risk exposure of individual earnings to GDP and stock returns varies across gender, age, the worker's earnings level, and industry. Aggregate risk exposure is U-shaped with respect to the earnings level. In the middle of the earnings distribution, aggregate risk exposure is higher for males, younger workers, and construction and durable manufacturing. At the top of the earnings distribution, aggregate risk exposure is higher for older workers and finance.