This is a study of the stability of family income in the United States and Germany. It compares the relative importance of labor market and welfare state institutions in accounting for or controlling temporal instability in living standards. A substantial body of research has arisen in recent years to assess the impact of rapid technological change and the globalization of markets on work careers, earnings, and the structure of inequality in society. It is now clear that the impact of structural change on these outcomes depends both on the institutional characteristics of labor markets and on state social welfare policy, and scholars have addressed a number of important aspects concerning these linkages. Two important issues, however, have received relatively little attention. First, little research has focused on the dynamics of family income as opposed to individual earnings. Second, little is known about the relative importance of labor market institutions, welfare state policies, and changes in family composition in creating or damping turbulence in the financial situation of families. A comparison of the United States and Germany will be valuable for three reasons. First, the institutional character of both Germany's labor markets and Germany's welfare state policies are quite different from those of the United States. Second, family structure is more stable in Germany than in the United States. Third, there exist high quality longitudinal data that allow comparable measures of the relevant variables for the two countries. The research utilizes data from the Panel Study of Income Dynamics and from the German Socio-Economic Panel to measure the level of fluctuation in overall family income and in its principal components (labor income, asset income, private transfers, taxes, and government transfers) for the period from 1983 until the very recent past. Fluctuation in these components of income and in overall income will be decomposed using standard methods, and the decomposition s for the United States and Germany will be compared in order to establish the amount of cross national differences, and the explanation for these differences. The findings will be valuable for several subdisciplines of sociology and economics, as well as for understanding the effect of government policies on families. This research addresses key questions concerning human capital, especially the ways that alternative labor market and welfare state institutions affect family income and well-being.
