Aggregate and Idiosyncratic Risk in a Frictional Labor Market

Leena Rudanko ()
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Leena Rudanko: Department of Economics, Boston University

No WP2010-054, Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics

Abstract: In this paper I develop a tractable extension of a Mortensen-Pissarides style matching model that allows for risk averse workers with limited ability to smooth consumption.1 I show that this leads to a form of equilibrium wage rigidity. This rigidity arises because the inability of workers to smooth their consumption across unemployment and employment spells changes how unemployed workers value wage offers, and hence also the offers that employers find profitable to make...

Pages: 21 pages
Date: 2010-01
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Aggregate and Idiosyncratic Risk in a Frictional Labor Market (2009)
Working Paper: Aggregate and Idiosyncratic Risk in a Frictional Labor Market (2008)
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