|
EconStor >
Rutgers University >
Department of Economics, Rutgers University >
Working Papers, Department of Economics, Rutgers University >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/10419/59473
|
| | |
| Title: | | Aggregate implications of heterogeneous households in a sticky-price model  |
| Authors: | | Lee, Jae Won |
| Issue Date: | | 2011 |
| Series/Report no.: | | Working Papers, Department of Economics, Rutgers, the State University of New Jersey 2011,32 |
| Abstract: | | This paper analyzes the role of heterogeneous households in propagating shocks over the business cycle by generalizing a basic sticky-price model to allow for imperfect risk-sharing between households that differ in labor incomes. I show that imperfectly insured household consumption distorts household incentive to supply labor hours through an idiosyncratic income effect, which in turn generates strategic complementarities in price setting and thus amplifies business cycle fluctuations. This mechanism diminishes the role of nominal rigidities and makes sticky-price models more consistent with microeconomic evidence on the frequency of price changes. |
| Subjects: | | heterogeneous households Phillips curve price stickiness strategic complementarities consumption insurance |
| JEL: | | E13 E30 E44 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Working Papers, Department of Economics, Rutgers University
|
| |
| | |
Download bibliographical data as:
BibTeX
|
| |
Share on:http://hdl.handle.net/10419/59473
|
Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.
|