Modeling and evaluating the heterogeneous impacts of the COVID-19 on US unemployment

Malak Kandoussi and François Langot ()
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Malak Kandoussi: UM6P - Université Mohammed VI Polytechnique = Mohammed VI Polytechnic University [Ben Guerir]
François Langot: GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - UM - Le Mans Université, CEPREMAP - Centre pour la recherche économique et ses applications - ECO ENS-PSL - Département d'économie de l'ENS-PSL - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris, UM - Le Mans Université

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Abstract: During the COVID-19 lockdown, the labor market faced unprecedented disruptions, particularly in unemployment, job separation, and the job finding rate. These unprecedented economic disruptions challenge existing models for understanding and assessing government interventions. This paper shows that a general equilibrium model with matching frictions may explain the impact of this crisis on US unemployment, while accounting for the contrasted impacts across various job types. This model is calibrated on the subprime-crisis experience and then used to identify the job-specific lockdown shocks, allowing it to predict the observed worker flows by diploma. The unemployment persistence is lowered by the CARES Act, which acted as a damping mechanism against its sharp increase by slowing down the separation dynamics and increasing the rate of hirings.

Date: 2025-02
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Published in Economic Modelling, 2025, 143, ⟨10.1016/j.econmod.2024.106978⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-05162964

DOI: 10.1016/j.econmod.2024.106978

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