Abstract: We study the long-run effects of persistent health risk in a frictional labor market. Motivated by UK evidence of weak employment and recruiting alongside lower-tail earnings compression, we develop a heterogeneous-agent model with incomplete insurance, directed search, and endogenous job destruction. We use evidence on recurrent infection to discipline the health process. With wages fixed within a match, lower expected labor capacity reduces firms' incentives to create and retain jobs. Unemployed workers respond by targeting lower wages to improve their employment prospects. This response is more prevalent among workers with little wealth, who have less scope to finance prolonged search. In the calibrated economy, unemployment rises and average contracted wages fall, with larger unemployment increases among low-wealth and low-productivity workers. Wage compression is concentrated at the bottom of the distribution, while upper-tail gaps change comparatively little. Overall income inequality nevertheless increases modestly as employment, contracted wages, and asset holdings adjust jointly.

Abstract: In standard heterogeneous-agent models, individuals self-insure against idiosyncratic shocks through precautionary saving. We extend this framework in two directions. First, individuals can reduce the probability of the shock through endogenous actions. Second, we introduce incomplete information, under which agents optimize over perceived rather than underlying states. We study these features in an infectious-disease environment. Individuals insure through both wealth accumulation and direct prevention, while asymptomatic infection makes their health status partially observable. We find a wealth gradient in the insurance choice: poorer individuals rely more on saving, whereas wealthier individuals rely more on prevention. This gradient links inequality to health risk and makes aggregate transmission endogenous. Quantitatively, we calibrate the model to UK data. In the stationary endemic equilibrium, wealth inequality falls while income inequality rises. Along the transition, short-run policy responses and work-from-home capacity shape wealth inequality, while information-based policies generate heterogeneous welfare gains.

Abstract: Population aging and internal migration are reshaping family support in developing countries, yet the effects of younger household members’ departure on older adults remain unclear. Using the China Health and Retirement Longitudinal Study, we find that such departures improve the mental health of older adults left behind. The gains are larger when household consumption rises and when leavers are older, but weaker when older adults live alone or in rural areas. To interpret these patterns, we develop and estimate a dynamic structural model in which mental health is persistent and younger household members endogenously choose whether and when to leave. The model decomposes the effect of departure into economic and non-pecuniary channels. Higher descendant consumption accounts for most of the mental-health improvement, while the loss of co-residence partially offsets these gains. Thus, separation benefits older adults primarily when it reflects descendants’ economic independence rather than a withdrawal of family support.

Abstract: The natural disaster, such as the COVID-19 pandemic, may reshape the relationship between charities and the government. This paper investigates the organizational behaviour of charitable fundraiser, focusing on the binary decision-making process of whether to initiate fundraising activities in response to pandemic shocks and government interventions through collaborative advocacy. We begin by developing a partial equilibrium model to generate several theoretical predictions. Then, we provide empirical evidence using the data of Charity in China. We apply a Difference-in-Difference framework to capture the treatment effect from both pandemic and government shocks. Consistent with our theoretical predictions, we identify a significant negative impact from the local outbreaks of pandemics and a positive effect from government advocacies on the probability of holding fundraising activities. The duration of these effects varies: government advocacy has a temporary impact, while the effects of pandemic outbreaks are more persistent.

Abstract: We model the impact of rising temperatures on labor productivity, labor market dynamics, and income inequality. Using a heterogeneous agent continuous-time (HACT) model with directed search, we analyze how temperature-induced productivity fluctuations influence the labor market, income and wealth inequality, and wealth accumulation. The model features workers differentiated by wealth, productivity, and location, where temperature affects transitions between high and low productivity states. Firms post fixed-wage contracts, and workers direct their job search across segmented labor markets. We calibrate the model using Vietnamese Labor Force data (2009-2018) matched with meteorological records, capturing regional temperature variations. With increased temperatures, in low wage markets the ratio of vacancies to unemployed workers searching in those market falls, as labor productivity declines and falling wealth leads workers to direct their search to these markets when vacancies are also falling. The wage distribution shifts to the left, and average incomes and wealth fall. Climate-induced productivity shocks amplify income and wealth disparities as wealthier individuals are able to self-insure better against the income risk. The results underscore the role of climate change in shaping labor market inequality and provide insights into policy interventions that may mitigate its adverse effects.