Risk Aversion and Unemployment in an Open Economy

Weiß Pia ()
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Weiß Pia: Institut für Wirtschaftspolitik an der Universität zu Köln, Pohligstraße 1, D-50969 Köln, Germany

Zeitschrift für Wirtschaftspolitik, 2000, vol. 49, issue 2, 137-156

Abstract: The paper analyses the impact which risk aversion has on a small open economy characterised by search frictions on the labour market. It is shown that the long-run qualitative effects caused by a terms-of-trade shock are independent of individual risk behaviour. As far as quantitative aspects are concerned risk aversion always leads to higher equilibrium employment; however the increase in unemployment due to a price shock is the higher the more risk-averse individuals are.

Date: 2000
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DOI: 10.1515/zfwp-2000-0203

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