Title: Industry, Age, and Unemployment Risk During a Pandemic Recession

Speaker: James Graham, Reserve Bank of New Zealand

Time: November 24, 2020,10:30-12:00

About the speaker:

James Graham graduated with a PhD in Economics from New York University in 2020. He is currently at the Reserve Bank of New Zealand, and will take up a position as Lecturer (Assistant Professor) at the University of Sydney in January 2021. James’ research interests are in macroeconomics, housing, and household finance. His job market paper studied the influence of housing investors on housing market outcomes during the GFC. Other work-in-progress studies: the effect of house price fluctuations on household consumption; the effect of local property taxes on school finances and inter-generational inequality; the effect of the current recession on the labour market and aggregate demand in New Zealand.

Abstract:

We model the macroeconomic and distributional effects of a pandemic shock, with an application to New Zealand. To do this we build a heterogeneous agent model featuring: overlapping generations of households, labour search, employment risk, and multiple industries. The calibrated model captures important cross-sectional features of the data that are important for understanding the effects of the pandemic shock: the higher concentration of young workers, higher unemployment risk, and lower wages in the service sector. The pandemic shock is heavily concentrated in services, which disproportionately raises unemployment risk for youth who can least afford to insure against it. We use the model to study the effects of the various fiscal responses to the pandemic, including wage subsidies, lump-sum transfers, and higher unemployment benefits. We find that conditional wage subsidies are effective at minimizing employment losses, especially among young households. However, lump-sum transfers and higher unemployment benefits better stabilize consumption fluctuations and thus tend to be welfare-improving relative to wage subsidies.