Labor Income Risk in Large Devaluations

Andres Blanco and Andres Drenik
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Andres Blanco: University of Michigan
Andres Drenik: Columbia University

No 1292, 2019 Meeting Papers from Society for Economic Dynamics

Abstract: Large devaluations are associated with reallocation of labor across employment status, sectors and firms. We measure monthly labor income risk across two large devaluations in Argentina, using a novel administrative employer-employee matched dataset covering the universe of formal workers during the 1996-2018 period. We find a substantial increase (resp. decrease) in job finding (resp. separation) rates following these episodes. Additionally, we find an increase in the standard deviation and a decrease in the skewness of the monthly earnings distribution. We rationalized these facts in a search model with risk averse workers and incomplete markets. The model provides an unify theory of endogenous labor income risk and current account determination during large devaluation.

Date: 2019
New Economics Papers: this item is included in nep-dge
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed019:1292

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