The Income and Consumption Effects of COVID‐19 and the Role of Public Policy*

We provide empirical evidence on the labour market impacts of COVID-19 in the UK and assess the effectiveness of mitigation policies. We estimate the relationship between employment outcomes and occupational and industrial characteristics and assess the effects on consumption. Seventy per cent of households in the bottom fifth of the earnings distribution hold insufficient assets to maintain current spending for more than one week. We compare the effectiveness of the UK's Coronavirus Job Retention Scheme and of Economic Impact Payments in the US. The EIPs are more effective at mitigating consumption reductions as they have full coverage, depend on household structure and are higher for low-income workers

‘Fair trade’ coffee and the mitigation of local oligopsony power

In recent years, there has been considerable growth in ‘fair trade’ markets for several commodities, most notably coffee. We argue that coffee is grown under conditions that might well subject growers to the market power of downstream intermediaries (processors). Using an approach designed to evaluate the effects of state trading enterprises on trade and welfare, we develop an oligopsony model of intermediaries. In this model, fair-trade processors optimise a welfare function that includes the producer surplus of coffee growers. This concern for growers' welfare among some processing firms helps to alleviate the market power distortion. We calibrate the model to price data reported by a fair-trade organisation and consider the counterfactual removal of fair-trade behaviour by processors. As expected, the income of coffee growers (in aggregate) is reduced, though the effects are quite small

The Impact of Immigration on Wages, Internal Migration and Welfare

This article studies the impact of immigration on wages, internal migration, and welfare. Using U.S. Census data, I estimate a spatial equilibrium model where labour differs by skill level, gender, and nativity. Workers are heterogeneous in city preferences. Cities vary in productivity levels, housing prices, and amenities. I use the estimated model to assess the distributional consequences of several immigration policies. The results show that a skill selective immigration policy leads to welfare gains for low skill workers, but welfare losses for high skill workers. The negative impacts are more substantial among the incumbent high skill immigrants. Internal migration mitigates the initial negative impacts, particularity in cities where housing supplies are inelastic. However, the negative wage impacts on some workers intensify. This is because an out-migration of workers of a given type may raise the local wages for workers of that type, while reducing the local wages of workers with complementary characteristics. Overall, there are substantial variations in the welfare effects of immigration across and within cities. Further, I use the model to assess the welfare effects of the border wall between Mexico and the U.S. The results show that the potential benefits are significantly smaller than the proposed cost of construction

Residual Wage Dispersion with Efficiency Wages

This article extends a classic on‐the‐job search model of homogeneous workers and firms by introducing a shirking problem. Workers choose their effort levels and search on the job. Firms elicit effort through wages and monitoring; an inverse relationship between wages and monitoring rates is derived. Wages play a dual role by allocating labor supply and motivating employee effort. This gives rise to an equilibrium wage distribution that contrasts with existing literature. In particular, I show that a hump‐shaped and positively skewed wage distribution, as observed empirically, can be derived even when firms and workers are, respectively, identical