Hur, Sewon, The Lost Generation of the Great Recession (December 30, 2014). Available for download at SSRN: http://ssrn.com/abstract=2546188

“This paper analyzes the effects of the Great Recession on different generations. While older generations have suffered the largest decline in wealth due to the collapse in asset prices, younger generations have suffered the largest decline in labor income. Potentially, the young may benefit from the purchase of cheaper assets, especially if they have access to credit. To analyze the impact of these channels, I construct an overlapping generations model with borrowing constraints in which households choose a portfolio over risky and risk-free assets. Shocks to labor efficiency and uncertainty regarding the return on risky assets generate a recession with a drop in asset prices and cross-sectional changes in risky investment that are consistent with the recent recession. Overall, the young suffer the largest welfare losses, equivalent to an 8 percent reduction in lifetime consumption.”