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Costs of business cycles for unskilled workers

  • Mukoyama, Toshihiko
  • Sahin, Aysegul

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.

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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 53 (2006)
Issue (Month): 8 (November)
Pages: 2179-2193

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Handle: RePEc:eee:moneco:v:53:y:2006:i:8:p:2179-2193
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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