Skill Loss during Unemployment and the Scarring Effects of the COVID-19 Pandemic

Paul Jackson and Victor Ortego-Marti
Additional contact information
Paul Jackson: National University of Singapore

No 202104, Working Papers from University of California at Riverside, Department of Economics

Abstract: We integrate the SIR epidemiology model into a search and matching framework with skill loss during unemployment. As infections spread, fewer jobs are created, skills deteriorate and TFP declines. The equilibrium is not efficient due to infection and skill composition externalities. Job creation increases infections due to increased interactions among workers. However, lower job creation decreases TFP due to skill loss. A three-month lockdown causes a 0.56% decline in TFP, i.e. nearly 50% of productivity losses in past recessions. We study the efficient allocation given the trade-off between both externalities and show that quantitatively the skill composition externality is sizable.

Keywords: COVID-19; Skill loss; TFP; Search and matching; Unemployment; Pandemics (search for similar items in EconPapers)
JEL-codes: E24 (search for similar items in EconPapers)
Date: 2021-01
New Economics Papers: this item is included in nep-dge, nep-lab, nep-mac and nep-sea
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Citations: View citations in EconPapers (1)

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https://economics.ucr.edu/repec/ucr/wpaper/202104.pdf First version, 2021 (application/pdf)

Related works:
Journal Article: Skill loss during unemployment and the scarring effects of the COVID-19 pandemic (2024)
Working Paper: Skill Loss during Unemployment and the Scarring Effects of the COVID-19 Pandemic (2020)
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