Flexible Labour, Income Effects, and Asset Prices

Economics Discussion Paper Series 851, University of Oxford, Department of Economics, 2018

26 Pages Posted: 5 Jun 2020

Date Written: May 2018

Abstract

This paper studies how flexible labor decisions affect asset pricing in a Real Business Cycle model. It uses Jaimovich-Rebelo preferences with internal habits in consumption and distinguishes between two income effect channels:

(i) the `habit income effect' channel and

(ii) the `separability income effect' channel.

I find that asset prices are superior when the first channel is strong and the second is weak, this is the case of using GHH preferences with internal habits in consumption.

Keywords: Asset Pricing, Income Effects, Jaimovich-Rebelo Preferences

JEL Classification: E13, E32, E44, G12

Suggested Citation

Nath, Rahul, Flexible Labour, Income Effects, and Asset Prices (May 2018). Economics Discussion Paper Series 851, University of Oxford, Department of Economics, 2018, Available at SSRN: https://ssrn.com/abstract=3596800 or http://dx.doi.org/10.2139/ssrn.3596800

Rahul Nath (Contact Author)

Ashoka University ( email )

Plot #2,
Rajiv Gandhi Education City
Kundli, 131028
India

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