Risk, Unemployment, and the Stock Market: A Rare-Event-Based Explanation of Labor Market Volatility

• 成果类型: Article
• 署名作者: Kilic, Mete; Wachter, Jessica A.
• 署名单位: University of Southern California; University of Pennsylvania; National Bureau of Economic Research
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhy008
• 发表日期: 2018
• 页码: 4762
• 关键词: cyclical behavior; long-run; equilibrium unemployment; Disaster risk; asset prices; consumption; VACANCIES; substitution; fluctuations; RESOLUTION

摘要

What is the driving force behind the cyclical behavior of unemployment and vacancies? What is the relation between firms' job-creation incentives and stock market valuations? We answer these questions in a model with time-varying risk, modeled as a small and variable probability of an economic disaster. A high probability implies greater risk and lower future growth, lowering the incentives of firms to invest in hiring. During periods of high risk, stock market valuations are low and unemployment rises. The model thus explains volatility in equity and labor markets, and the relation between the two.