search query: @author Donaldson, J. B. / total: 4
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| Author: | Danthine, J.-P. Donaldson, J. B. |
| Title: | Labour relations and asset returns |
| Journal: | Review of Economic Studies
2002 : JAN, VOL. 69:1(238), p. 41-64 |
| Index terms: | Industrial relations Human resource management Assets Return on investment |
| Freeterms: | Labour relations |
| Language: | eng |
| Abstract: | The paper proposes a dynamic GE model with standard business cycle properties that also achieves a satisfactory replication of the major financial stylized facts. The authors ride on two major ideas. First, they show that operating leverage, originating in the priority status of wage claims given the observed business cycle characteristics of the latter, magnifies the risk properties of the residual payments to firm owners and justifies a substantial risk premium. They also build on the observation that the low frequency variations in income shares constitute a significant source of risk, one that is unlikely to be insurable. When the authors price this risk in an incomplete market framework, they obtain a GE model with return volatilities close to observations and a sizable equity premium. |
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