Dynamics of individual income rank volatility. Evidence from West Germany and the US

This paper presents a methodology for comparing income rank volatility profiles over time and across distributions. While most of the existing measures are affected by changes in marginal distributions, this paper proposes a framework based on individuals’ relative positions in the distribution that is neutral to structural changes that occur in that distribution. Applying this approach to West Germany and the US over three decades, we show that while poorer individuals in both countries are the most volatile in all periods investigated, the long-term trends of volatility at the different points of the distribution in each of these countries differ.