The Implications of Changes in Hours Fluctuations on Welfare Costs of Business Cycles

11 Pages Posted: 21 Oct 2014 Last revised: 15 Dec 2014

See all articles by Myungkyu Shim

Myungkyu Shim

Yonsei University - School of Economics

Hee-Seung Yang

Yonsei University

Date Written: November 2, 2014

Abstract

Hours volatility has changed non-monotonically across skill groups since the mid-1980s. This study researches the implications of such changes on the welfare costs of business cycles. Using a partial equilibrium model in which hours fluctuations are the only source of uncertainty, we find that (1) the welfare cost of business cycles of mid-skilled workers is comparable to that of high-skilled workers after the mid-1980s, (2) the relative welfare cost of low-skilled to high-skilled workers declined substantially but remains very high, and (3) treating mid- and low-skilled workers as one group provides incorrect information about the changes in welfare costs.

Keywords: Change in hours fluctuation, welfare cost of business cycle

JEL Classification: J24, E24, E32

Suggested Citation

Shim, Myungkyu and Yang, Hee-Seung, The Implications of Changes in Hours Fluctuations on Welfare Costs of Business Cycles (November 2, 2014). Available at SSRN: https://ssrn.com/abstract=2512648 or http://dx.doi.org/10.2139/ssrn.2512648

Myungkyu Shim

Yonsei University - School of Economics ( email )

Seoul
Korea, Republic of (South Korea)

Hee-Seung Yang (Contact Author)

Yonsei University ( email )

50 Yonsei-ro, Seodaemun-gu
Seoul, 03722
Korea, Republic of (South Korea)
82 2 2123 2480 (Phone)

HOME PAGE: http://sites.google.com/site/heeseungyang/

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