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| Author: | Beaudry, P. Pages, C. |
| Title: | The cost of business cycles and the stabilization value of unemployment insurance |
| Journal: | European Economic Review
2001 : AUG, VOL. 45:8, p. 1545-1572 |
| Index terms: | BUSINESS CYCLES LABOUR MARKETS STABILIZATION UNEMPLOYMENT INSURANCE WELFARE |
| Language: | eng |
| Abstract: | This paper offers a new perspective on why labour market policies aimed at reducing the cost of business cycles may be warranted and how such policies can be designed in order to improve welfare. To this end, the authors develop a quantitative dynamic equilibrium model to illustrate how the contractual structure of the labor market may hide significant undiversified wage risk induced by aggregate fluctuations. The environment analyzed is such that the only imperfectly diversified risk workers bear the risk of losing their job when the market for new contracts is depressed. |
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