Effects of Social Distancing Policy on Labor Market Outcomes
Suggested CitationGupta, S., Montenovo, L., Nguyen, T., Lozano-Rojas, F., Schmutte, I., Simon, K. et al. (2022) "Effects of social distancing policy on labor market outcomes." Contemporary Economic Policy, 41(1) pp.166-193.
US workers receive unemployment benefits if they lose their job, but not for reduced working hours. In alignment with the benefits incentives, we find that the labor market responded to COVID-19 and related closure-policies mostly on the extensive (12 pp outright job loss) margin. Exploiting timing variation in state closure-policies, difference-in-differences (DiD) estimates show, between March 12 and April 12, 2020, employment rate fell by 1.7 pp for every 10 extra days of state stay-at-home orders (SAH), with little effect on hours worked/earnings among those employed. Forty percentage of the unemployment was due to a nationwide shock, rest due to social-distancing policies, particularly among “non-essential” workers.