On the aggregate welfare cost of great depression unemployment

• 成果类型: Article
• 署名作者: Chatterjee, Satyajit; Corbae, Dean
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - Philadelphia; University of Texas System; University of Texas Austin
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2007.03.002
• 发表日期: 2007
• 页码: 1529-1544
• 关键词: depression; unemployment; welfare cost

摘要

The potential benefit of policies that eliminate a small likelihood of economic crises is calculated. An economic crisis is defined as an increase in unemployment of the magnitude observed during the Great Depression. For the U.S., the maximum likelihood estimate of entering a depression is found to be about once every 83 years. The welfare gain from setting this small probability to zero can range between 1% and 7% of annual consumption in perpetuity. For most estimates, more than half of these large gains results from a reduction in individual consumption volatility. (c) 2007 Elsevier B.V. All rights reserved.