Research & Discussions

Abstract: This paper studies the interplay between the liquidity position of displaced workers and the choice of their next sector of employment, and its implication for economic fluctuations driven by sectoral shocks. I develop a heterogenous-agent framework featuring multiple sectors, frictional labor markets and costly labor reallocation. Changing sectors results in short-term productivity losses while exiting unemployment faster. More liquidity enables displaced workers to reallocate across sectors while smoothing out earnings losses. I document empirical evidence in support of this channel using administrative data from Washington state and exploiting a regression kink design. Displaced workers with more liquidity are more likely to switch industries upon re-employment. Industry switchers experience 10 percentage points lower immediate earnings compared to industry stayers, but the gap closes within 8 quarters. Calibrated to my data, the model predicts that more generous unemployment insurance fosters more labor reallocation. When shocks affect sectors unevenly, this leads to less severe recessions.

Abstract: This paper explores the link between the UK's participation in global value chains (GVCs) and inflation dynamics. Using a two-country model with input-output linkages, we demonstrate analytically that an increased reliance on imported intermediate goods, serving as a GVC proxy, results in a flatter Phillips curve. Empirically, we find evidence indicating that UK industries with higher proportions of intermediate imports from Emerging Market Economies (EMEs) exhibit a flatter Phillips curve. This observation stems not only from the impact of the GVC integration on the slope but also from the influence of cyclical forces that shape firms' marginal costs via international relative price fluctuations. Specifically, we highlight how the limited business cycle correlation between the UK economy and EMEs reduces the pass-through of domestic shocks to prices.

Abstract: This article documents five facts regarding the micro-level patterns of international remittance flows. We leverage new administrative data from a large global money transfer operator (MTO). First, we find that remittance senders use their local currency as the reference currency as opposed to the recipient's local currency. Second, we find that an individual sender's remittance amount doesn't change frequently. Therefore, remittance flows are sticky in the sender's currency. Third, we find that on average, a given sender has multiple recipients, which tend to be located in one country. Fourth, we find that the recipient's local currency is the most common receiving currency, but the U.S. dollar is a prominent receiving currency in some Emerging Markets. Fifth, we find that during the pandemic, there was an increase in the number of transfers and volume of remittance flows through the MTO and this was driven in equal parts by existing and new senders to the platform.