On the heterogeneous impacts of the COVID-19 lockdown on US unemployment

Malak Kandoussi (1) , François Langot (2, 3, 4, 5)

1 EPEE - Centre d'Etudes des Politiques Economiques
2 GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux
3 IUF - Institut universitaire de France
4 PSE - Paris School of Economics
5 IZA - Forschungsinstitut zur Zukunft der Arbeit - Institute of Labor Economics

We develop a matching model that predicts the impact of the COVID-19 lockdown on US unemployment, while accounting for the contrasted impacts across various job types. The model is calibrated on the subprime experience and is then used to identify the job-specific lockdown shocks, using observed worker flows by diploma. The model persistence-which is significantly larger than in the Diamond-Mortensen-Pissarides model-is dampened by CARES act that facilitates the use of temporary separations. Counterfactual experiments show that time-varying risk, hiring cost externalities, and wage rigidity are needed to account for these crises.

Keywords: COVID-19; Unemployment; search and matching; Worker heterogeneity

Domains: Economics and Finance

Malak Kandoussi, François Langot. On the heterogeneous impacts of the COVID-19 lockdown on US unemployment. 2021. ⟨hal-03107369⟩