Arbeitspapier
The cost of business cycles for unskilled workers
This paper reconsiders the cost of business cycles under incomplete markets. Primarily, we focus on the heterogeneity in the cost of business cycles among agents with different skill levels. Unskilled workers are subject to a much larger risk of unemployment during recessions than are skilled workers. Moreover, unskilled workers earn less income, which limits their ability to self-insure. We examine how this heterogeneity in unemployment risk and income translates into heterogeneity in the cost of business cycles. We set up a dynamic general equilibrium model with incomplete markets, in which there is heterogeneity in skills, employment status, asset holding, and the discount factor. We find that the welfare cost of business cycles for unskilled workers is substantially higher than that for skilled workers.
- Language
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Englisch
- Bibliographic citation
-
Series: Staff Report ; No. 214
- Classification
-
Wirtschaft
Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Business Fluctuations; Cycles
Policy Objectives; Policy Designs and Consistency; Policy Coordination
- Subject
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cost of business cycles, incomplete markets, skill and unemployment
Konjunktur
Soziale Kosten
Unvollkommener Markt
Ungelernte Arbeitskräfte
Dynamisches Gleichgewicht
Theorie
- Event
-
Geistige Schöpfung
- (who)
-
Mukoyama, Toshihiko
Sahin, Aysegül
- Event
-
Veröffentlichung
- (who)
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Federal Reserve Bank of New York
- (where)
-
New York, NY
- (when)
-
2005
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Mukoyama, Toshihiko
- Sahin, Aysegül
- Federal Reserve Bank of New York
Time of origin
- 2005
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