Model uncertainty, economic development, and welfare costs of business cycles

Some researchers argue that the welfare gains from eliminating consumption fluctuations for United States are not small once model uncertainty is taken into account. This paper presents new evidence on using a data set broad range of countries. It quantifies exactly effect an analytical formula. The results indicate most countries derive much larger reduction compared with States. Countries at higher stages economic development tend to have lower because their become smaller. relationship does depend country size or trade openness.