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Costs of Business Cycles for Unskilled Workers

Toshihiko Mukoyama () and Aysegul Sahin ()

No 5002, Working Papers from Concordia University, Department of Economics

Abstract: This paper reconsiders the cost of business cycles under market incompleteness. Primarily, we focus on the heterogeneity in the cost among different skill groups. Unskilled workers are subject to a much larger risk of unemployment during recessions than are skilled workers. Moreover, unskilled workers earn less income, which limits their ability to self-insure. We examine how this heterogeneity in unemployment risk and income translates into heterogeneity in the cost of business cycles. We find that the welfare cost of business cycles for unskilled workers is substantially higher than the welfare cost for skilled workers.

Keywords: Cost of Business Cycles; Incomplete Markets; Skill and Unemployment (search for similar items in EconPapers)
JEL-codes: E24 E32 E61 (search for similar items in EconPapers)
Date: 2005-06
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Related works:
Journal Article: Costs of business cycles for unskilled workers (2006) Downloads
Working Paper: The cost of business cycles for unskilled workers (2005) Downloads
Working Paper: Costs of Business Cycles for Unskilled Workers (2005) Downloads
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