요약Social Distancing, Labor Supply, and Income Distribution / DUKSANG CHO
The effects of social distancing measures on income distributions and aggregate variables are examined with an off-the-shelf heterogeneous-agent incomplete-market model. The model shows that social distancing measures, which limit households’ labor supply, can decrease the labor supply of low-income households who hold insufficient assets and need income the most given their borrowing constraints. Social distancing measures can therefore exacerbate income inequality by lowering the incomes of the poor. An equilibrium interest rate can fall when the social distancing shock is expected to be persistent because households save more to prepare for rising consumption volatility given the possibility of binding to the labor supply constraint over time. When the shock is expected to be transitory, in contrast, the interest rate can rise upon the arrival of the shock because constrained households choose to borrow more to smooth consumption given the expectation that the shock will fade away. The model also shows that social distancing shocks, which diminish households’ consumption demand, can decrease households’ incomes evenly for every income quantile, having a limited impact on income inequality.
Who’s Hit Hardest? The Persistence of the Employment Shock by the COVID-19 Crisis / JOSEPH HAN
The persistence of the employment shock by COVID-19 has various policy implications during the pandemic and beyond it. After evaluating the impact of the health crisis at the individual level, this study decomposes employment losses into persistent and transitory components using the observed timing of the three major outbreaks and subsequent lulls. The estimation results show that while face-to-face services were undoubtedly hit hard by the COVID-19 crisis, the sectoral shock was less persistent for temporary jobs and self-employment. Permanent jobs in the hard-hit sector showed increasingly large persistent losses through the recurring crises, indicating gradual changes in employer responses. The persistent job losses were concentrated on young and older workers in career transitions, whose losses are likely to have long-term effects. These results suggest that targeted measures to mitigate the persistent effects of the employment shock should take priority during the recovery process.
Searching for the Cause of the Gender Gap in Employment Losses during the COVID-19 Crisis / JIYEON KIM
The recession caused by the COVID-19 crisis has features that could disproportionately harm female employment. Risk of infection and social distancing measures may have disrupted jobs in face-to-face industries, which have traditionally hired more women than men. School closures and a consequent increase in childcare and homeschooling demands may have discouraged labor market participation by working mothers. Using the Economically Active Population Survey, I examine how female employment was affected by each factor. I find that the gender gap in the Employment to Nonparticipation (E to N) transition rates is twice as large as the gap in the Employment to Unemployment (E to U) transition rates. Women’s overrepresentation in the face-to-face industries accounts for most of the gap in the E to U transition but only a third of the gap in the E to N transition. The rise in non-participation is especially pronounced among married women aged 39-44, the group most likely to have elementary-school-age children.
Korea’s Inflation Expectations with regard to the Phillips Curve and Implications of the COVID-19 Crisis / KYU-CHUL JUNG
This paper estimates the expectation-augmented Phillips curve, which explains inflation dynamics, in Korea. The phenomenon of low inflation in Korea has been going on for quite some time, in particular since 2012. During the Covid-19 crisis, due to low inflation expectations the operation of monetary policy was limited as the base rate approached the zero lower bound. The main objective of this paper is to estimate where and how tightly inflation expectations are anchored. It was found that long-term inflation expectations fell to around 1%, falling short of the inflation target, and that inflation expectations are strongly anchored to long-term expectations, which implies that the low inflation phenomenon is likely to extend into the future. The results also imply that even if inflation fluctuates due to temporary disturbances, it may converge to a level below the inflation target. The slight rebound of long-term expectations during the Covid-19 crisis suggests that the aggressive monetary policy may have contributed to improving economic agents’ beliefs about the commitment of monetary authorities to inflation stability. This may also help long-term expectations gradually to approach the inflation target.
The Impact of COVID-19 Regional Cash Subsidies on the Sales of Local Businesses in South Korea / MEEROO KIM AND YOON HAE OH
This paper examines the impact of the regional cash subsidies which were granted in some districts in addition to the national universal stimulus payment in South Korea related to the COVID-19 pandemic. We evaluate the effects of the cash distribution per resident on aggregate credit and debit card sales and sales by industry using the difference-in-difference method. The increment in card spending due to the cash subsidy is about 1.58%p in total, and this effect is concentrated within a single month. The consumption stimulating effect is prominent among (semi)-durable goods that do not require close interactions between customers and sellers. In contrast, the effect is relatively small in the high-contact face-to-face service sectors and restaurants, areas the COVID-19 pandemic hit directly. On the other hand, some service sectors where customers could wear face masks, such as education and fitness, experienced a substantial sales boost due to the cash subsidy