Time-Varying Risk Premia and Heterogeneous Labor Market Dynamics

Maarten Meeuwis, Dimitris Papanikolaou, Jonathan Rothbaum and Lawrence Schmidt

No 31968, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using U.S. administrative data on worker earnings, we show that increases in risk premia lead to lower labor earnings, particularly for lower-paid workers. These declines are primarily driven by job separations. We build an equilibrium model of labor market search that quantitatively replicates the observed heterogeneity in labor market dynamics across worker earnings levels. Our findings underscore the role of time-varying risk premia as a key driver of labor market fluctuations and highlight the importance of both the job creation and the job destruction margins in understanding the heterogeneity in worker outcomes over the business cycle.

JEL-codes: E3 E40 G1 J20 J30 (search for similar items in EconPapers)
Date: 2023-12
New Economics Papers: this item is included in nep-lma, nep-mac, nep-rmg and nep-upt
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