Aggregate risk and wage dispersion

Paul Scanlon

Economics Letters, 2020, vol. 194, issue C

Abstract: Integrating elements of finance and labor theory, I quantify the degree to which aggregate risk affects wage premia. In the model, wages are stochastic, covary with the state of the economy, and command a risk premium. Using asset price data, I develop a lower bound for this premium, and show that it is quantitatively large for highly cyclical jobs with volatile labor compensation. By raising top incomes, this channel has played a role in amplifying income inequality.

Keywords: Inequality; Compensating differentials; Income distribution; Risk premium (search for similar items in EconPapers)
JEL-codes: J24 J3 J30 J31 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:194:y:2020:i:c:s0165176520302329

DOI: 10.1016/j.econlet.2020.109366

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