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 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.