Objective Not least the Great Recession shows that micro-level uncertainty and borrowing constraints have first-order macroeconomic consequences and how their fluctuations influence business cycles. To understand many aspects of business-cycles, a vast literature highlights nominal rigidities to be pivotal. Nevertheless, almost all macroeconomic models abstract from these rigidities for tractability when introducing heterogeneous agents, uncertainty, and borrowing constraints. Vice versa, the nominal-rigidities, representative-agent approach, standard in business-cycle research, ignores micro uncertainty and heterogeneity outright; again for tractability.This significantly limits our understanding. With incomplete markets, it depresses consumption if micro uncertainty increases or borrowing constraints tighten. With flexible prices, this implies a boom driven by investment and an increase in labour supply. This contradicts empirical evidence showing that uncertainty is countercyclical. However, nominal rigidities could quantitatively align model prediction and evidence as they make aggregate output demand-determined.This motivates the proposed research project, where the first objective is to develop a quantitative framework that merges nominal rigidities with market incompleteness. I then analyse income risk from unemployment as a propagation mechanism and fluctuations in borrowing constraints as potential drivers of business cycles.As income risk from the labour market is a central to any incomplete markets model, these first projects are complemented by projects on the micro structure of job and worker flows, grasping frictions in hiring workers or creating jobs. These projects build on a unique data set generated by a small team around me at the Institute of Employment Research of the German Federal Employment Agency, which covers all quarterly worker- and job flows for the universe of German plants since 1975 with detailed information on workers and plants. Fields of science social scienceseconomics and businesseconomicsmacroeconomicssocial scienceseconomics and businessbusiness and managementemployment Programme(s) FP7-IDEAS-ERC - Specific programme: "Ideas" implementing the Seventh Framework Programme of the European Community for research, technological development and demonstration activities (2007 to 2013) Topic(s) ERC-SG-SH1 - ERC Starting Grant - Individuals, institutions and markets Call for proposal ERC-2011-StG_20101124 See other projects for this call Funding Scheme ERC-SG - ERC Starting Grant Host institution RHEINISCHE FRIEDRICH-WILHELMS-UNIVERSITAT BONN EU contribution € 878 800,00 Address REGINA PACIS WEG 3 53113 Bonn Germany See on map Region Nordrhein-Westfalen Köln Bonn, Kreisfreie Stadt Activity type Higher or Secondary Education Establishments Principal investigator Christian Walter Bayer (Prof.) Administrative Contact Daniela Sprinkmeier (Mrs.) Links Contact the organisation Opens in new window Website Opens in new window Total cost No data Beneficiaries (1) Sort alphabetically Sort by EU Contribution Expand all Collapse all RHEINISCHE FRIEDRICH-WILHELMS-UNIVERSITAT BONN Germany EU contribution € 878 800,00 Address REGINA PACIS WEG 3 53113 Bonn See on map Region Nordrhein-Westfalen Köln Bonn, Kreisfreie Stadt Activity type Higher or Secondary Education Establishments Principal investigator Christian Walter Bayer (Prof.) Administrative Contact Daniela Sprinkmeier (Mrs.) Links Contact the organisation Opens in new window Website Opens in new window Total cost No data