On the fluctuations in consumption and market returns in the presence of labor and human capital: An equilibrium analysis

✍ Scribed by Suleyman Basak

• Publisher: Elsevier Science
• Year: 1999
• Tongue: English
• Weight: 249 KB
• Volume: 23
• Category: Article
• ISSN: 0165-1889
• DOI: 10.1016/s0165-1889(98)00049-9

✦ Synopsis

We examine the e!ects of human capital on consumption, stock market, and other #uctuations in a general equilibrium continuous-time model. A representative con-sumer}worker}investor derives utility from consumption and leisure. A representative "rm demands labor as the sole input to a stochastic production technology, driven by general (possibly nonmultiplicative) shocks. For Cobb}Douglas utility and multiplicative shocks, labor is nonstochastic, and consumption and stock market volatility are equated, as under no human capital. Deviations from this are analyzed. For logarithmic utility and &constant elasticity of substitution' production technology, cases are identi"ed where the presence of labor causes consumption to be smoother than the stock market.