A version of this paper was presented at the Econometric Society Summer Meeting, Cornell University, June 16-19, 1982.
This note presents a model whose competitive equilibrium can be consistent with the observation that current labor market conditions affect the well-being of new entrants more than they do that of senior workers. The model uses the notion that new entrants are not around soon enough to participate in risk-sharing contingent on the shocks that determine the equilibrium marginal products of first-period employment. This timing notion is formalized using a stochastic overlapping generations model.
- Federal Reserve Bank of Minneapolis. Research Division.
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