The Economic Ripple Effects of COVID-19

Francisco Buera, Roberto N. Fattal-Jaef, Hugo Hopenhayn, Pablo Neumeyer and Yongseok Shin
Authors registered in the RePEc Author Service: Roberto N. Fattal Jaef

No 28704, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: What are the effects of a temporary lockdown of the economy? Do firms' deteriorating balance sheets and labor market frictions propagate and prolong the effects? We answer these questions in a model with financial and labor market frictions. The model makes quantitative predictions about the effect of lockdowns of varying magnitude and duration on output, employment and firm dynamics. We find that the effects are not persistent if (i) workers on temporary layoff can be recalled by their previous employers without having to go through the frictional labor market and (ii) the government provides employment subsidies to firms during the lockdown. However, the effects are heterogeneous and young non-essential firms are disproportionately affected. In addition, if lockdowns lead to more permanent reallocation across industries, the recession becomes more protracted. Although the paper is motivated by the lockdowns during the Covid-19 pandemic, the framework can be readily applied to large, temporary shocks of different nature.

JEL-codes: E32 E44 L25 (search for similar items in EconPapers)
Date: 2021-04
New Economics Papers: this item is included in nep-cwa, nep-dge and nep-mac
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
http://www.nber.org/papers/w28704.pdf (application/pdf)

Related works:
Working Paper: The Economic Ripple Effects of COVID-19 (2021)
Working Paper: The Economic Ripple Effects of COVID-19 (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:28704

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w28704

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().