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Flexible Labour, Income Effects, and Asset Prices

Rahul Nath

No 851, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: This paper studies how flexible labour decisions affect asset pricing in a Real Business Cycle model. It uses Jaimovich-Rebelo preferences with internal habits in consumption and distinguishes between two income effect channels (i) the ‘habit income effect’ channel and (ii) the ‘separability income effect’ channel. I ï¬ nd that asset prices are superior when the ï¬ rst channel is strong and the second is weak, this is the case of using GHH preferences with internal habits in consumption.

Keywords: Asset Pricing; Income Effects; Jaimovich-Rebelo Preferences (search for similar items in EconPapers)
JEL-codes: E13 E32 E44 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2018-05-31
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