Implications of Labor Market Frictions for Risk Aversion and Risk Premia

Eric Swanson

American Economic Journal: Macroeconomics, 2020, vol. 12, issue 2, 194-240

Abstract: A flexible labor margin allows households to absorb asset value shocks with changes in hours worked, altering the households' attitudes toward risk (Swanson 2012). This paper analyzes how frictional labor markets affect that analysis. Risk aversion is higher (i) in countries with more frictional labor markets, (ii) in recessions, and (iii) for households that have more difficulty finding a job. Labor market frictions in Europe are large enough to raise risk aversion in those countries. Nevertheless, risk aversion in the United States and Europe is much closer to the frictionless benchmark in Swanson (2012) than to traditional, fixed-labor measures.

JEL-codes: D11 D81 E24 E32 J22 (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/mac.20170446 (application/pdf)
https://www.aeaweb.org/doi/10.1257/mac.20170446.data (application/zip)
https://www.aeaweb.org/doi/10.1257/mac.20170446.appx (application/pdf)
https://www.aeaweb.org/doi/10.1257/mac.20170446.ds (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Implications of Labor Market Frictions for Risk Aversion and Risk Premia (2019)
Working Paper: Implications of Labor Market Frictions for Risk Aversion and Risk Premia (2013)
Working Paper: Implications of Labor Market Frictions for Risk Aversion and Risk Premia (2013)
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: https://EconPapers.repec.org/RePEc:aea:aejmac:v:12:y:2020:i:2:p:194-240

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

DOI: 10.1257/mac.20170446

Access Statistics for this article

American Economic Journal: Macroeconomics is currently edited by Simon Gilchrist

More articles in American Economic Journal: Macroeconomics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().