scholarly journals Implications of Labor Market Frictions for Risk Aversion and Risk Premia

2014 ◽  
pp. 01-47
Author(s):  
Eric T. Swanson ◽  
Keyword(s):  
Labor Market ◽  
Risk Aversion ◽  
Risk Premia ◽  
Market Frictions ◽  
Labor Market Frictions

scholarly journals Implications of Labor Market Frictions for Risk Aversion and Risk Premia

2020 ◽  
Vol 12 (2) ◽  
pp. 194-240
Author(s):  
Eric T. Swanson
Keyword(s):  
Labor Market ◽  
Risk Aversion ◽  
Labor Markets ◽  
The United States ◽  
Risk Premia ◽  
Market Frictions ◽  
Flexible Labor ◽  
Asset Value ◽  
Labor Market Frictions ◽  
Frictional Labor Markets

A flexible labor margin allows households to absorb asset value shocks with changes in hours worked, altering the households’ attitudes toward risk (Swanson 2012). This paper analyzes how frictional labor markets affect that analysis. Risk aversion is higher (i) in countries with more frictional labor markets, (ii ) in recessions, and (iii ) for households that have more difficulty finding a job. Labor market frictions in Europe are large enough to raise risk aversion in those countries. Nevertheless, risk aversion in the United States and Europe is much closer to the frictionless benchmark in Swanson (2012) than to traditional, fixed-labor measures. (JEL D11, D81, E24, E32, J22)

scholarly journals Trade and Frictional Unemployment in the Global Economy

2020 ◽  
Vol 18 (6) ◽  
pp. 2869-2921 ◽  
Author(s):  
Céline Carrère ◽  
Anja Grujovic ◽  
Frédéric Robert-Nicoud
Keyword(s):  
United States ◽  
Labor Market ◽  
Global Economy ◽  
The United States ◽  
Market Frictions ◽  
Unemployment Benefits ◽  
Trade Model ◽  
Labor Market Frictions ◽  
Trade Opening ◽  
Employment Data

Abstract We develop a multicountry, multisector trade model featuring risk-averse workers, labor market frictions, unemployment benefits, and equilibrium unemployment. Trade opening leads to a reduction in unemployment when it simultaneously raises welfare and reallocates labor toward sectors with lower-than-average labor market frictions. We then estimate and calibrate the model using employment data from 31 OECD countries and worldwide trade data. Finally, we quantify the potential unemployment, real wage, and welfare effects of repealing NAFTA and raising bilateral tariffs between the United States and Mexico to 20%. This policy would increase unemployment by 2.4% in the United States and 48% in Mexico.

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