This study examines the response of aggregate consumption to active labor market policies that reduce unemployment. We develop a dynamic general equilibrium model with heterogeneous agents and uninsurable unemployment as well as policy regime shocks to quantify the consumption effects of policy....

This paper quantifies the effect of time-varying employment risks on the fluctuations of aggregate consumption in a dynamic general equilibrium with incomplete markets. A government's redistribution policy through provision of unemployment insurance can cause a positive correlation between...