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Intergenerational Redistribution in the Great Recession

Author

Listed:
  • Andrew Glover
  • Jonathan Heathcote
  • Dirk Krueger
  • José-Víctor Ríos-Rull

Abstract

The Great Recession saw sharp drops in labor earnings and even larger declines in asset prices. How were the welfare losses from these declines distributed across different age groups? To address this question we construct an overlapping-generations general equilibrium model in which households face large aggregate shocks. A calibrated version of the model replicates observed dynamics for asset prices. Younger households experience larger earnings losses in a model Great Recession, but benefit from being able to buy assets at temporarily depressed prices. As a result, the model predicts that the young experience smaller welfare losses than older cohorts.

Suggested Citation

  • Andrew Glover & Jonathan Heathcote & Dirk Krueger & José-Víctor Ríos-Rull, 2020. "Intergenerational Redistribution in the Great Recession," Journal of Political Economy, University of Chicago Press, vol. 128(10), pages 3730-3778.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/708820
    DOI: 10.1086/708820
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    More about this item

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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