The Lost Generation of the Great Recession

49 Pages Posted: 8 Jan 2015 Last revised: 10 May 2018

See all articles by Sewon Hur

Sewon Hur

Federal Reserve Bank of Dallas

Date Written: May 1, 2018

Abstract

This paper analyzes the effects of the Great Recession on different generations. While older generations suffered the largest decline in wealth due to the collapse in asset prices, younger generations suffered the largest decline in labor income. Potentially, some households may have benefited from the purchase of cheaper assets. To analyze the impact of these channels, I construct an overlapping-generations model with borrowing constraints in which households choose a portfolio of risky and risk-free assets. In response to shocks to labor income and asset markets resembling the Great Recession, young risky asset holders suffer the largest welfare losses, equivalent to a 33 percent reduction in one-period consumption.

Keywords: Great Recession; heterogeneous agents; overlapping generations; portfolio choice; borrowing constraints

JEL Classification: D15, D31, E21, E32, G11

Suggested Citation

Hur, Sewon, The Lost Generation of the Great Recession (May 1, 2018). Available at SSRN: https://ssrn.com/abstract=2546188 or http://dx.doi.org/10.2139/ssrn.2546188

Sewon Hur (Contact Author)

Federal Reserve Bank of Dallas ( email )

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States

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