Wage Risk and Employment Risk over the Life Cycle

Hamish Low, Costas Meghir and Luigi Pistaferri

American Economic Review, 2010, vol. 100, issue 4, 1432-67

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)

JEL-codes: D91 J22 J31 J61 J64 J65 (search for similar items in EconPapers)
Date: 2010
Note: DOI: 10.1257/aer.100.4.1432
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Citations: View citations in EconPapers (383)

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Related works:
Working Paper: Wage Risk and Employment Risk over the Life Cycle (2009)
Working Paper: Wage risk and employment risk over the life cycle (2008)
Working Paper: Wage Risk and Employment Risk over the Life Cycle (2008)
Working Paper: Wage Risk and Employment Risk Over the Life Cycle (2007)
Working Paper: Wage risk and employment risk over the life cycle (2006)
Working Paper: Wage risk and employment risk over the life-cycle (2004)
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