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Accounting for idiosyncratic wage risk over the business cycle

  • Tamas Papp

    (Institute for Advanced Studies)

  • Alisdair McKay

    (Boston University)

We show that a parsimoniously calibrated search-and-matching model of the labor market with on-the-job search gives a good account of the cyclical variation in idiosyncratic wage risk among those experiencing unemployment and of the composition effect over the business cycle. As these components generate around 80% of the total, we argue that such a model gives a good account of cyclical variation in idiosyncratic wage risk.

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Paper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 820.

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Date of creation: 2012
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Handle: RePEc:red:sed012:820
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