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Search in the Labor Market under Imperfectly Insurable Income Risk, Mauro Roca

Label
Search in the Labor Market under Imperfectly Insurable Income Risk, Mauro Roca
Language
eng
Abstract
This paper develops a general equilibrium model with unemployment and noncooperative wage determination to analyze the importance of incomplete markets when risk-averse agents are subject to idiosyncratic employment shocks. A version of the model calibrated to the U.S. shows that market incompleteness affects individual behavior and aggregate conditions: it reduces wages and unemployment but increases vacancies. Additionally, the model explains the average level of unemployment insurance observed in the U.S. A key mechanism is the joint influence of imperfect insurance and risk aversion in the wage bargaining. The paper also proposes a novel solution to solve this heterogeneous-agent model
resource.governmentPublication
international or intergovernmental publication
Literary Form
non fiction
Main title
Search in the Labor Market under Imperfectly Insurable Income Risk
Nature of contents
dictionaries
Oclc number
449931755
Responsibility statement
Mauro Roca
Series statement
IMF Working Papers
Table Of Contents
Cover Page -- Title Page -- Copyright Page -- Contents -- I. Introduction -- II. The Model -- A. Labor Market -- B. Consumers -- C. Firms -- 1. Wage determination -- D. Government -- E. Stationary Equilibrium -- III. Solution method -- A. Fast-turnover limit -- B. Approximation -- 1. Steady state -- 2. Approximation around steady state -- IV. Quantitative analysis -- A. Calibration -- B. The effects of idiosyncratic risk -- 1. Effects of Idiosyncratic Risk on the Labor Market -- 1. Approximation to Consumption Functions -- 2. Effects of Idiosyncratic Risk on Consumption and Capital -- C. Optimal replacement rate -- 2. Variations in Welfare -- 3. Effects of Unemployment Insurance -- 4. Effects of Idiosyncratic Risk -- V. Conclusions -- I. Derivation of the solution to the wage bargaining -- II. Fast-turnover limit -- A. Derivation of the Euler condition -- B. Derivation of the wage equation -- III. Approximation around the steady state -- A. Response to individual asset holdings -- B. Response to the length of the time interval Δ -- References -- Footnotes
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