Softening the blow: Job retention schemes in the pandemic

Jolan Mohimont, Maite de Sola Perea () and Marie-Denise Zachary ()
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Maite de Sola Perea: Economics and Research Department, National Bank of Belgium
Marie-Denise Zachary: Economics and Research Department, National Bank of Belgium

No 414, Working Paper Research from National Bank of Belgium

Abstract: We evaluate the welfare effects of the economic consequence of the COVID shock and job retention schemes (JRS) in a heterogenous agents DSGE model calibrated to the euro area. We find that the welfare cost of the COVID shock is large. Households who hold a limited stock of financial wealth and are unable to perfectly insure against shocks to their labor incomes experience larger welfare losses. JRS implemented in response to the pandemic have large favorable welfare effects and benefit all households. These gains are particularly strong for liquid-asset-poor households, especially for those that are also unemployed or furloughed. JRS bring stronger benefits in economies characterized by labor markets with low exit/entry rates from/to unemployment.

Keywords: COVID-19; job retention schemes; furlough; household inequality; idiosyncratic risks; labor markets; welfare cost; DSGE. (search for similar items in EconPapers)
JEL-codes: E21 E24 E52 E62 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2022-09
New Economics Papers: this item is included in nep-dge and nep-eec
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Journal Article: Softening the blow: Job retention schemes in the pandemic (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:nbb:reswpp:202209-414

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