We show that time-varying risk premium in financial markets can explain a key, yet puzzling, feature of labor markets: the large differences in unemployment risk across worker age groups over the business cycle. Our search model features a time-varying risk premium and learning about unobserved heterogeneity in worker productivity. Their interaction generates large real effects through firms’ labor policies. Our model predicts higher unemployment risk of younger workers relative to prime-age workers when risk premium is high, and the employment ratio of prime-age to young workers to be more cyclical in high beta industries. We find empirical support for these predictions.
Editors
Editorial Team
Twitter
RFS Dataverse
Code for RFS papers is found in the RFS Dataverse.
RFS Statistics
- Turnaround:
Mean: 54.33 days
Median: 47 daysTotal Submissions:
(since 7/3/21): 1668Acceptance Rate:
(since 7/3/21): 4.98% For Papers Currently Under Review Conference Announcements
CEPR European Conference on Household Finance
Submission Deadline: July 15, 2022, 12:00pm (BST)SFS Cavalcade Asia-Pacific
December 16-18, 2022Forthcoming
Email Alerts
Want to be notified when new RFS papers and issues are available online? Sign up for journal email alerts.
-
Search