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Incomplete Unemployment Insurance and Aggregate Fluctuations

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Author Info
Francesc Obiols-Homs (ITAM)

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Abstract

This paper develops a real business cycle model characterized by idiosyncratic employment shocks and quantitatively explores the behavior of aggregate variables under the assumptions of complete and incomplete insurance markets. The results show that the model with incomplete markets produces standard deviations and correlations of aggregate labor input and labor productivity close to the ones of the US economy for the post-war period. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/S1094-2025(03)00005-X
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Publisher Info
Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 6 (2003)
Issue (Month): 3 (July)
Pages: 602-636
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Handle: RePEc:red:issued:v:6:y:2003:i:3:p:602-636

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Related research
Keywords: aggregate fluctuations; Idiosyncratic shocks; Incomplete insurance;

Other versions of this item:

Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation
J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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    Other versions:
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  4. Marcet, Albert & Singleton, Kenneth J., 1999. "Equilibrium Asset Prices And Savings Of Heterogeneous Agents In The Presence Of Incomplete Markets And Portfolio Constraints," Macroeconomic Dynamics, Cambridge University Press, vol. 3(02), pages 243-277, June. [Downloadable!]
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  5. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February. [Downloadable!] (restricted)
  6. Cooley, T.F. & Cho, J.O., 1991. "The Business Cycle with Nominal Contracts," Papers 90-07, Rochester, Business - General.
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  7. Finn E. Kydland, 1993. "Business cycles and aggregate labor-market fluctuations," Working Paper 9312, Federal Reserve Bank of Cleveland. [Downloadable!]
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  10. Huggett, Mark, 1997. "The one-sector growth model with idiosyncratic shocks: Steady states and dynamics," Journal of Monetary Economics, Elsevier, vol. 39(3), pages 385-403, August. [Downloadable!] (restricted)
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  13. Anton Braun, R., 1994. "Tax disturbances and real economic activity in the postwar United States," Journal of Monetary Economics, Elsevier, vol. 33(3), pages 441-462, June. [Downloadable!] (restricted)
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  16. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November. [Downloadable!] (restricted)
  17. Albert Marcet & Francesc Obiols-Homs & Philippe Weil, 2002. "Incomplete Markets, Labor Supply and Capital Accumulation," Economics Working Papers 659, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2003. [Downloadable!]
    Other versions:
  18. Baxter, Marianne, 1996. "Are Consumer Durables Important for Business Cycles?," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 147-55, February. [Downloadable!] (restricted)
  19. Kjetil Storesletten & Chris I. Telmer & Amir Yaron, 2001. "How Important Are Idiosyncratic Shocks? Evidence from Labor Supply," American Economic Review, American Economic Association, vol. 91(2), pages 413-417, May. [Downloadable!] (restricted)
  20. Mark Huggett & Sandra Ospina, 1998. "On Aggregate Precautionary Saving: When is the Third Derivative Irrelevant?," Working Papers 9802, Centro de Investigacion Economica, ITAM.
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  22. Cho, Jang-Ok & Cooley, Thomas F., 1994. "Employment and hours over the business cycle," Journal of Economic Dynamics and Control, Elsevier, vol. 18(2), pages 411-432, March. [Downloadable!] (restricted)
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  23. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November. [Downloadable!] (restricted)
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  24. Per Krusell & Anthony A. Smith & Jr., 1998. "Income and Wealth Heterogeneity in the Macroeconomy," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 867-896, October. [Downloadable!] (restricted)
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  25. Rogerson, Richard, 1988. "Indivisible labor, lotteries and equilibrium," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 3-16, January. [Downloadable!] (restricted)
  26. Imrohoruglu, Ayse, 1989. "Cost of Business Cycles with Indivisibilities and Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1364-83, December. [Downloadable!] (restricted)
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  28. Storesletten, Kjetil & Telmer, Chris I. & Yaron, Amir, 2001. "The welfare cost of business cycles revisited: Finite lives and cyclical variation in idiosyncratic risk," European Economic Review, Elsevier, vol. 45(7), pages 1311-1339. [Downloadable!] (restricted)
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  29. Gary D. Hansen & Randall Wright, 1992. "The labor market in real business cycle theory," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 2-12. [Downloadable!]
  30. Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 269-300, November. [Downloadable!] (restricted)
  31. Mankiw, N. Gregory, 1986. "The equity premium and the concentration of aggregate shocks," Journal of Financial Economics, Elsevier, vol. 17(1), pages 211-219, September. [Downloadable!] (restricted)
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  32. Prescott, Edward C & Townsend, Robert M, 1984. "Pareto Optima and Competitive Equilibria with Adverse Selection and Moral Hazard," Econometrica, Econometric Society, vol. 52(1), pages 21-45, January. [Downloadable!] (restricted)
  33. Ana Castaneda & Javier Diaz-Gimenez & Jose-Victor Rios-Rull, 1995. "Unemployment spells and income distribution dynamics," Working Papers 95-9, Federal Reserve Bank of Philadelphia.
  34. repec:cup:macdyn:v:3:y:1999:i:2:p:243-77 is not listed on IDEAS
  35. Rios-Rull, Jose-Victor, 1994. "On the quantitative importance of market completeness," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 463-496, December. [Downloadable!] (restricted)
  36. Huggett, Mark, 1993. "The risk-free rate in heterogeneous-agent incomplete-insurance economies," Journal of Economic Dynamics and Control, Elsevier, vol. 17(5-6), pages 953-969. [Downloadable!] (restricted)
  37. Aiyagari, S Rao, 1994. "Uninsured Idiosyncratic Risk and Aggregate Saving," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 659-84, August. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Albert Marcet & Francesc Obiols-Homs & Philippe Weil, 2002. "Incomplete Markets, Labor Supply and Capital Accumulation," Economics Working Papers 659, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2003. [Downloadable!]
    Other versions:
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