NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Hamish Low

Working Papers and Chapters

April 2009Wage Risk and Employment Risk over the Life Cycle
with Costas Meghir, Luigi Pistaferri: w14901
We specify a structural life-cycle model of consumption, labour supply and job mobility in an economy with search frictions that allows us to distinguish between different sources of risk and to estimate their effects. The sources of risk are shocks to productivity, job destruction, the process of job arrival when employed and unemployed and match level heterogeneity. In contrast to simpler models that attribute all income fluctuations to shocks, our framework disentangles variability due to shocks from variability due to the responses to these shocks. Estimates of productivity risk, once we control for employment risk and for individual labour supply choices, are substantially lower than estimates that attribute all wage variation to productivity risk. Increases in productivity risk impos...

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