The Macroeconomics of Hedging Income Shares
Juan Passadore and
Facundo Piguillem ()
No 14732, CEPR Discussion Papers from C.E.P.R. Discussion Papers
The recent debate about the falling labor share has brought the attention to the income shares' trends, but less attention has been devoted to their variability. In this paper, we analyze how their fluctuations can be insured between workers and capitalists, and the corresponding implications for financial markets. We study a neoclassical growth model with aggregate shocks that affect income shares and financial frictions that prevent firms from fully insuring idiosyncratic risk. We examine theoretically how aggregate risk sharing is distorted by the combination of idiosyncratic risk and moving shares. Accumulation of safe assets by firms and risky assets by households emerges naturally as a tool to insure income shares' risk. We calibrate the model to the U.S. economy and show that low rates, rising capital shares, and accumulation of safe assets by firms and risky assets by households can be rationalized by persistent shocks to the labor share.
Keywords: Income; shares; fluctuation.; Risk; Sharing.; Asset; prices.; Corporate; Savings; Glut (search for similar items in EconPapers)
JEL-codes: E20 E32 E44 G11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-mac and nep-ore
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at firstname.lastname@example.org
Working Paper: The macroeconomics of hedging income shares (2020)
Working Paper: The Macroeconomics of Hedging Income Shares (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:14732
Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... rs/dp.php?dpno=14732
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().