Claudio Campanale

Asset Pricing in a Production Economy with Chew-Dekel Preferences

In this paper we provide a thorough characterization of the asset returns implied by a simple general equilibrium production economy with Chew–Dekel risk preferences and convex capital adjustment costs. When households display levels of disappointment aversion consistent with the experimental evidence, a version of the model parameterized to match the volatility of output and consumption growth generates unconditional expected asset returns and price of risk in line with the historical data. For the model with Epstein–Zin preferences to generate similar statistics, the relative risk aversion coefficient needs to be about 55, two orders of magnitude higher than the available estimates. We argue that this is not surprising, given the limited risk imposed on agents by a reasonably calibrated stochastic growth model.

Two-tier labour market reform: a quantitative general equilibrium assessment

ABSTRACT In the 1990s several European countries liberalized the use of fixed-term labour contracts in an effort to reduce persistently low employment growth. This article studies the effect of these reforms through the lens of a version of the Hopenhayn and Rogerson (1993) model calibrated on Italian data. We find no effect of the reform on total employment in steady state.