Nonlinearity in the Income Smoothing: Evidence for the US Counties

Abstract

This paper explores income smoothing pattern for the US counties by considering nonlinear manner. We apply threshold regression method to the income smoothing measure invented by Asdrubali, Sorensen, and Yosha(1996). It is found that the income smoothing across the US counties is not uniform but rather distinguishable when per capita earning by place of work is taken as a threshold variable. The evidence for nonlinear income smoothing is observed for all the channels via social insurance, cross-country commuting, capital market, and personal transfer. Our finding implies that the US income smoothing policies or systems should be differently considered depending on per capita earning of the concerned regions.