Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/229123
Authors: 
Ferrari, Alessandro
Year of Publication: 
2020
Series/Report no.: 
ECB Working Paper No. 2509
Abstract: 
This paper studies the effect of deep recessions on intergenerational inequality by quantifying the welfare effects on households at different phases of the life cycle. Deep recessionary episodes are characterized by large declines in the prices of real and financial assets and in employment. The former levies high welfare costs on older households who own financial wealth, the latter determines labour income losses and destroys the human capital of younger cohorts, lowering their productivity. The paper extends previous analyses in the literature by including permanent labour income losses in an OLG model calibrated to match the Great Recession. The analysis shows that younger households lose more than double of all other living cohorts, as younger household become unemployed and experience a decline in their future income. The dynamics of households' consumption and portfolio composition between 2007 and 2013 in the US are consistent with the predictions of the model.
Subjects: 
Overlapping Generations
Inequality
Aggregate Risk
Youth Unemployment
Portfolio choice
JEL: 
E21
D31
D58
D63
D91
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-4455-7
Document Type: 
Working Paper

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