Amalia Repele: Wealth Sorting and Cyclical Earnings Risk

Seminars - PhD JM Practice Talk - Macroeconomics
Speakers
Amalia Repele, Bocconi University
12:30 - 13:45
Alberto Alesina Seminar Room 5.e4.sr04 - floor 5 - via Roentgen 1

Abstract: Using data from the PSID survey in the US, I present suggestive evidence that the employment probability of asset-poor individuals is more elastic to changes in aggregate output. This finding cannot be fully explained by skills or socio-demographics. I propose a directed search framework that generates this covariance in equilibrium, through job sorting. The model features two-sided heterogeneity in the labor market and aggregate uncertainty. Under certain conditions, asset-poor individuals sort into jobs featuring larger cyclical unemployment risk, as these jobs offer higher matching probability. Through a similar mechanism, in bad times agents choose to adjust their job search to ``worse'' jobs to sustain their consumption. I quantify the implications of wealth sorting on wages and job transitions over the business cycle, and revisit results on the cost of business cycles across the wealth distribution.
For Information contact angela.baldassarre@unibocconi.it or giulia.zenoni@unibocconi.it