This setting lets you change the way you view articles. You can choose to have articles open in a dialog window, a new tab, or directly in the same window.
Open in Dialog
Open in New Tab
Open in same window
Open in New Tab
Open in same window
American Economic Review: Vol. 97 No. 3 (June 2007)
AER Volume. 97, Issue 3 | 
Previous ArticleNext Article
Sign up for Email Alerts Follow us on Twitter
AER Forthcoming Articles
Full-text Article
Previous ArticleNext Article
Expand
Quick Tools:
Print Article Summary Email Link to this Article Export CitationSign up for Email Alerts Follow us on Twitter
Explore:
AER Forthcoming Articles
Job Displacement Risk and the Cost of Business Cycles
Article Citation
Krebs, Tom. 2007. "Job Displacement Risk and the Cost of Business Cycles."
American Economic Review,
97(3): 664-686.
DOI: 10.1257/aer.97.3.664
DOI: 10.1257/aer.97.3.664
Abstract
This paper analyzes the welfare costs of business cycles when workers face uninsurable
job displacement risk. The paper uses a simple macroeconomic model with
incomplete markets to show that cyclical variations in the long-term earnings losses
of displaced workers can generate arbitrarily large cost of business cycles even if
the variance of individual income changes is constant over the cycle. In addition to
the theoretical analysis, this paper conducts a quantitative study of the cost of
business cycles using empirical evidence on the long-term earnings losses of US
workers. The quantitative analysis shows that realistic variations in job displacement
risk generate sizable costs of business cycles, even though a second-moment
analysis would suggest negligible costs. (JEL E21, E24, E32, J63)
Article Full-Text Access
Full-text Article
Authors
Krebs, Tom
