Abstract: Government needs to balance the growth and economic fluctuations, and the correct understanding of the welfare loss of the economic cycles is of great significance for the government to formulate macroeconomic policies. The paper expands the Lucas model, and establishes an estimation model of economic cycles cost including the fluctuations of laboring hours, finding that the welfare loss of the economic cycles is related to the fluctuations of laboring hours. The costs of economic cycles reach 0.1598% to 0.2437%, if we consider that some people assume the total fluctuations of laboring hours, the estimated value will reach 0.1844% to 2.306%, making the estimation of the costs of economic cycles out of the shackles of the risk aversion coefficient. Therefore, this paper thinks that the inter period fluctuations of laboring hours will also damage residents’ welfare and the analysis of the costs of economic cycles should focus on the impact of the cycles fluctuation on allocation of resources.

Key words: costs of economic cycles, fluctuations of laboring hours, risk aversion