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Labor Income Risk in Large Devaluations

Author

Listed:
  • Andres Blanco

    (University of Michigan)

  • Andres Drenik

    (Columbia University)

Abstract

Large devaluations are associated with reallocation of labor across employment status, sectors and firms. We measure monthly labor income risk across two large devaluations in Argentina, using a novel administrative employer-employee matched dataset covering the universe of formal workers during the 1996-2018 period. We find a substantial increase (resp. decrease) in job finding (resp. separation) rates following these episodes. Additionally, we find an increase in the standard deviation and a decrease in the skewness of the monthly earnings distribution. We rationalized these facts in a search model with risk averse workers and incomplete markets. The model provides an unify theory of endogenous labor income risk and current account determination during large devaluation.

Suggested Citation

  • Andres Blanco & Andres Drenik, 2019. "Labor Income Risk in Large Devaluations," 2019 Meeting Papers 1292, Society for Economic Dynamics.
    • Handle: RePEc:red:sed019:1292
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    References listed on IDEAS

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