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Low, Hamish,
Costas Meghir, and
Luigi Pistaferri. 2010. "Wage Risk and Employment Risk over the Life Cycle."
,
100(4): 1432-67.
Show Article Details
DOI: 10.1257/aer.100.4.1432
Abstract:We specify a life-cycle model of consumption, labor supply and job mobility in an economy with search frictions. We distinguish different sources of risk, including shocks to productivity, job arrival, and job destruction. Allowing for job mobility has a large effect on the estimate of productivity risk. Increases in the latter impose a considerable welfare loss. Increases in employment risk have large effects on output and, primarily through this channel, affect welfare. The welfare value of programs such as Food Stamps, partially insuring productivity risk, is greater than the value of unemployment insurance which provides (partial) insurance against employment risk. (JEL D91, J22, J31, J61, J64, J65)
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Authors:
Low, Hamish (U Cambridge and Institute for Fiscal Studies, London)
Meghir, Costas (U College London and Institute for Fiscal Studies, London)
Pistaferri, Luigi (Stanford U and SIEPR)
JEL Classifications:
D91: Intertemporal Consumer Choice; Life Cycle Models and Saving
J22: Time Allocation and Labor Supply
J31: Wage Level and Structure; Wage Differentials
J61: Geographic Labor Mobility; Immigrant Workers
J64: Unemployment: Models, Duration, Incidence, and Job Search
J65: Unemployment Insurance; Severance Pay; Plant Closings
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