links both the cyclical fluctuations and the mean level of unemployment to the aggregate business cycle risk. The key result … of the paper is that business cycles are costly for all consumers, regardless of their wealth, yet that unemployment … fluctuations themselves are not the source of these costs. Rather fluctuations over the cycle induce higher average unemployment …

-market policy instruments, namely, a vacancy subsidy, a layoff tax and unemployment benefits. The authors derive analytical … that hiring subsidies, layoff taxes and the replacement rate of unemployment insurance should all rise in recessions. The …