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We decompose permanent earnings risk into contributions from hours and wage shocks. To distinguish between hours shocks …-cycle model of consumption and labor supply. Both permanent wage and hours shocks are important to explain earnings risk, but wage … shocks have greater relevance. Progressive taxation strongly attenuates cross-sectional earnings risk, its life …
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In this paper we investigate the effects of uncertainty shocks on economic activity using a Dynamic Stochastic General Equilibrium (DSGE) model with heterogenous agents and a stylized banking sector. We show that frictions in credit supply amplify the effects of uncertainty shocks on economic...
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