Research

Abstract: Do liquid savings help displaced workers change sectors when changing sectors results in short-run earnings losses but long-run gains? I provide causal evidence that displaced workers with access to liquidity are more likely to switch industries. To do so, I rely on a regression kink design approach using data from Washington state and show that a $10 increase in weekly benefits raised the propensity of switching by 0.55 percentage points. Upon re-employment, I find that switchers initially have 10 percentage points lower earnings than stayers, but the gap reverses within two years. To rationalize these findings, I develop a quantitative framework that features incomplete markets, multiple sectors and costly labor reallocation. More liquidity enables displaced workers to reallocate across sectors while smoothing out earnings losses and leaving unemployment faster. According to the model, more generous unemployment insurance fosters more 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 paper studies the drivers of international remittance flows and their implications for international risk-sharing. In the last 30 years, international remittance flows have become an increasingly important component of capital flows to low-and-middle-income countries and in recent years, have overtaken FDI. We design a survey to understand the reasons behind migrants’ remittance flows and how remittance senders would behave in a series of hypothetical situations. Preliminary results suggest that the majority of international remittances are sent for the purpose of family support and remittance senders increase their transfers when family members abroad face a negative income shock. Using the results from the survey, we develop a two-country model featuring endogenous remittance flows in general equilibrium and use the model to quantify their role in international risk-sharing.