Conference Agenda
Please note that all times are shown in the time zone of the conference. The current conference time is: 15th Sept 2026, 08:44:48am CEST
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Daily Overview |
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AP 08: Equity Risk Premia and Correlation Risk Location: LR M2.1 (Floor 2) Session Chair: Allan Timmermann, University of California-San Diego | |
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ID: 1911
Risk Premia, Firm Insurance, and Endogenous Labor Income Risk 1: Washington University in St. Louis; 2: Kellogg School of Management and NBER; 3: University of California, San Diego and NBER We study how aggregate financial conditions shape firm insurance and, through it, labor income risk. In a directed search model with dynamic wage contracts and two-sided limited commitment, firm insurance against idiosyncratic shocks erodes when risk premia rise. Using U.S. administrative data, we document new evidence supporting the model: pass-through of firm shocks to earnings rises in bad times, especially for lower-paid workers near the separation margin. The model reproduces many untargeted time-series and cross-sectional features of earnings risk and implies substantial welfare costs of idiosyncratic risk, high private discount rates on human capital, and large gains from recession-contingent transfers.
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