Time-Varying Risk Premium and Unemployment Risk across Age Groups

• 成果类型: Article
• 署名作者: Mitra, Indrajit; Xu, Yu
• 署名单位: University of Michigan System; University of Michigan; University of Hong Kong
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhz122
• 发表日期: 2020
• 页码: 3624
• 关键词: labor-market; cyclical behavior; equilibrium unemployment; Return predictability; job destruction; match quality; large numbers; stock-market; EXACT LAW; PRODUCTIVITY

摘要

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.