Labor Relations and Asset Returns

Détails

ID Serval
serval:BIB_3C7FAB890AAC
Type
Article: article d'un périodique ou d'un magazine.
Collection
Publications
Institution
Titre
Labor Relations and Asset Returns
Périodique
Review of Economic Studies
Auteur(s)
Danthine J.-P., Donaldson J.B.
Statut éditorial
Publié
Date de publication
2002
Peer-reviewed
Oui
Volume
69
Numéro
1
Pages
41-64
Résumé
This paper proposes a dynamic GE model with standard business cycle properties that also achieves a satisfactory replication of the major financial stylized facts. We ride on two major ideas. First, we show that operating leverage, originating in the priority status of wage claims given the observed business cycle characteristics of the latter, magnifies the risk properties of the residual payments to firm owners and justifies a substantial risk premium. Further we build on the observation that the low frequency variations in income shares constitute a significant source of risk, one that is unlikely to be insurable. When we price this risk in an incomplete market framework, we obtain a GE model with return volatilities close to observations and a sizable equity premium. This is accomplished in a world of low risk aversion and standard utility function but with agent heterogeneity. Workers with restricted access to financial markets are insured by firms and the consumption and preferences of firm owners solely determine the pricing kernel.
Création de la notice
19/11/2007 11:17
Dernière modification de la notice
20/08/2019 14:32
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