Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/115890
Authors: 
Mankart, Jochen
Oikonomou, Rigas
Year of Publication: 
2015
Series/Report no.: 
Discussion Paper, Deutsche Bundesbank 26/2015
Abstract: 
We develop a theoretical model with labor market frictions, incomplete financial markets and with households which have two members. Households face unemployment risks but their members adjust their labor supplies to insure against unemployment. We use the model to explain the cyclical properties of aggregate employment and participation. As in the US data, the model predicts that the participation rate (the fraction of individuals that want jobs) is not strongly correlated with aggregate economic activity. This property is in sharp contrast to the strongly procyclical participation predicted by both neoclassical models and models with search frictions, when we assume bachelor households or households with infinitely many members (complete markets). In the two member household model and in the data, primary earners are always in the labor force, secondary earners have a mildly countercyclical participation rate and a mildly procyclical employment rate. Their behavior insures the household against unemployment risks.
Subjects: 
Heterogeneous Agents
Family Self Insurance
Labor Market Search
Aggregate Fluctuations
JEL: 
E24
E25
E32
J10
J64
ISBN: 
978-3-95729-178-3
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.