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Working Paper
Sectoral Impact of COVID-19: Cascading Risks
Workers are unequal in the face of the COVID-19 pandemic: Those who work in essential sectors face higher health risk whereas those in non-essential social-consumption sectors face greater economic risk. We study how these health and economic risks cascade into other sectors through supply chains and demand linkages. In the U.S., we find the cascading effects account for about 25-30% of the exposure to both risks. The cascading effect increases the health risk faced by workers in the transportation and retail sectors, and it increases the economic risk faced by workers in the textile and ...
Working Paper
Enduring Relationships in an Economy with Capital and Private Information
We study efficient risk sharing in a model where agents operate linear production technologies with private information about idiosyncratic productivity. Capital is the sole factor of production, and accumulable. We establish a time-invariant, one-to-one mapping between the capital allocated to an agent and his lifetime utility entitlement. The mapping implies properties that are distinct from those in models with private information about endowments. In contrast to the latter, the value of the risk-sharing arrangement in our model always remains above the autarky value. There is no need for ...
Working Paper
Enduring Relationships in an Economy with Capital and Private Information
We study efficient risk sharing in a model where agents operate linear production technologies with private information about idiosyncratic productivity. Capital is the sole factor of production, and accumulable. We establish a time-invariant, one-to-one mapping between the capital allocated to an agent and his lifetime utility entitlement. The mapping implies properties that are distinct from those in private-information endowment models. In contrast to the endowment model, the value of the risk-sharing arrangement in our model always remains above autarky value, so there is no need for ...
Working Paper
Misallocation and Intersectoral Linkages
We analytically characterize the aggregate productivity loss from allocative distortions in a setting that accounts for the sectoral linkages of production. We show that the effects of distortions and the role of sectoral linkages depend crucially on how substitutable inputs are. We find that the productivity loss is smaller if input substitutability is low. Moreover, with low input substitutability, sectoral linkages do not systematically amplify the effects of distortions. In addition, the impact of the sectors that supply intermediate inputs becomes smaller. We quantify these effects in ...