This paper studies the business-cycle variation in higher-order (labor) income risk—that is, risks that are captured by moments higher than the variance. We examine the extent to which such risks can be smoothed within households or with government social insurance and tax policies. We use...

This paper studies the business-cycle variation in higher-order (labor) income risk--that is, risks that are captured by moments higher than the variance. We examine the extent to which such risks can be smoothed within households or with government social insurance and tax policies. We use...

In this paper we construct a stochastic overlapping-generations general equilibrium model in which households are subject to aggregate shocks that affect both wages and asset prices. We use a calibrated version of the model to quantify how the welfare costs of severe recessions are distributed...