Abstract
There is no doubt that recessions and expansions are economy wide phenomena; however, there is no reason to believe everyone will be affected equally. Differences in race, gender, region, marital status, educational attainment, and other individual characteristics are likely to help determine how people are affected by recessions and expansions. This paper examines differences across the mild recession of 2001, the severe recession of 2008 and the expansionary periods in between by constructing a panel data set of almost 40 million observations over the years 2000 to 2016. One of the main findings of this thesis is that marital status and gender have large and statistically significant impacts on the incomes of individuals during recessionary and expansionary periods. The results show that although married individuals earn higher incomes, the other marital status groups such as single, divorced, and separated people are affected less than others when the economy is in distress. This research is not able to justify previous research that income varied more for men than for women during recessions, the results in this thesis show the opposite. That is, recessionary periods do not harm males more and, therefore, do not seem to be beneficial in reducing the gender wage gap. Instead, the size of gender differences seems to narrow only during expansionary periods. In addition, this paper also shows that single individuals may be more economically disadvantaged during recessions. The findings in this study show that single, divorced, and separated people may have a slight advantage when compared to married individuals working in periods of both growth and decline. These results are consistent with the interpretation that single and separated people may be more desirable to employers when the economy is in distress because single people are more willing to do the same amount of work for lower pay. Without a spouse, they may have little choice but to continue to work. Recessions and expansions also appear to have differential impacts based on educational attainment. The results shown here is consistent with previous literature that argue that education reduces the negative impacts of recession on income. The findings in this study show that income is not affected too heavily by the growth or decline in the economy but worker with a high school diploma or an associate degree is more favorable in hiring standards during the recessionary periods. The results show that those with very little education, as well as those with post-graduate degrees, did slightly worse during the last recession compared to those with other levels of educational attainment. Surprisingly, while the coefficients on the race and ethnicity variables are statistically different from zero, the magnitudes of the coefficients are generally small. When race is interacted with economic status, the coefficients are statistically significant, but not large for most groups. Many other personal characteristic variables, particularly marital status and educational attainment are more important in the regressions than race. That is, while the Great Recession of 2008 led to large declines in incomes, the negative impacts seem to have influenced every race fairly equally.