The cost of business cycles for unskilled workers

Toshihiko Mukoyama () and Aysegul Sahin ()

No 214, Staff Reports from Federal Reserve Bank of New York

Abstract: 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.

Keywords: Unemployment; Business cycles; Labor market (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.newyorkfed.org/research/staff_reports/sr214.html (text/html)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden
http://www.newyorkfed.org/research/staff_reports/sr214.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:fip:fednsr:214

Ordering information: This working paper can be ordered from
http://www.ny.frb.org/rmaghome/staff_rp/

Access Statistics for this paper

More papers in Staff Reports from Federal Reserve Bank of New York
Contact information at EDIRC.
Series data maintained by Diane Rosenberger ().