The Welfare Costs of Macroeconomic Fluctuations Under Incomplete Markets: Evidence from State-Level Consumption Data

@article{Jacobs2005TheWC,
  title={The Welfare Costs of Macroeconomic Fluctuations Under Incomplete Markets: Evidence from State-Level Consumption Data},
  author={K. Jacobs and St́ephane Pallage and Michel A. Robe},
  journal={Macroeconomics eJournal},
  year={2005}
}
  • K. Jacobs, St́ephane Pallage, Michel A. Robe
  • Published 2005
  • Economics
  • Macroeconomics eJournal
  • Existing estimates of the welfare cost of business cycles suggest that it is quite low and might well be minuscule. Many of these estimates are based on aggregate U.S. consumption data. Arguably, because markets are incomplete and risk-sharing is imperfect, the welfare costs computed with aggregate consumption data are likely underestimates. Yet, incomplete-market models have not yielded significantly greater cost figures. Previous incomplete-market studies, however, have relied on model… CONTINUE READING