The Lost Generation of the Great Recession

Sewon Hur

Review of Economic Dynamics, 2018, vol. 30, 179-202

Abstract: This paper analyzes the effects of the Great Recession on different generations. While older generations suffered the largest decline in wealth due to the collapse in asset prices, younger generations suffered the largest decline in labor income. Potentially, some households may have benefited from the purchase of cheaper assets. To analyze the impact of these channels, I construct an overlapping-generations model with borrowing constraints in which households choose a portfolio of risky and risk-free assets. In response to shocks to labor income and asset markets resembling the Great Recession, young risky asset holders suffer the largest welfare losses, equivalent to a 33 percent reduction in one-period consumption. (Copyright: Elsevier)

Keywords: Great Recession; Heterogeneous agents; Overlapping generations; Portfolio choice; Borrowing constraints (search for similar items in EconPapers)
JEL-codes: D15 D31 E21 E32 G11 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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DOI: 10.1016/j.red.2018.05.004

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