This paper argues that a risk-premium mechanism plays an important tole in the transmission of macroeconomic uncertainty shocks to the labor market. In a quantitative model, this channel accounts for a significant fraction of the uncertainty-induced rise in unemployment, and it implies that uncertainty shocks are less deflationary than regular demand shocks, nor can they be fully neutralized by monetary policy.

We propose a capitalist-worker two-agent New Keynesian model to study the interaction of fiscal policy and household heterogeneity in a tractable environment.  The model is consistent with micro data on empirical intertemporal marginal propensities to consume and it avoids implausible profit income effects on labor supply. Relative to the traditional two-agent model, these features imply, respectively, a lower sensitivity of consumption to the composition of public financing; and smaller fiscal multipliers alongside pronounced redistributive effects. 

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