Insurance and opportunities
Subtitle: a welfare analysis of labor market risk
By: Jonathan Heathcote, Kjetil Storesletten, Giovanni L. Violante.
Contributors: Storesletten, Kjetil.; Violante, Giovanni L.; National Bureau of Economic Research.
Series: NBER working paper series -- working paper 13673; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 13673.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "Using a model with constant relative risk-aversion preferences, endogenous labor supply and partial insurance against idiosyncratic wage risk, we provide an analytical characterization of three welfare effects: (a) the welfare effect of a rise in wage dispersion, (b) the welfare gain from completing markets, and (c) the welfare effect from eliminating risk.  Our analysis reveals an important trade-off for these welfare calculations.  On the one hand, higher wage uncertainty increases the cost associated with missing insurance markets.  On the other hand, greater wage dispersion presents opportunities to raise aggregate productivity by concentrating market work among more productive workers.  Our welfare effects can be expressed in terms of the underlying parameters defining preferences and wage risk, or alternatively in terms of changes in observable second moments of the joint distribution over individual wages, consumption and hours"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 6/5/2008.

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