Labour Market Reallocation Effects of COVID-19 Policies in Spain: A Tale of Two Recessions

Arbeitspapier

This paper studies short-time work arrangements (ERTEs) when aggregate risk is partially sector-specific. In Spain, the Great Recession and the pandemic recession (aka the Great Contagion) can both be understood as being driven partially by large sector-specific shocks. However, the latter shows much less labor reallocation because ERTEs were available to firms. We show that ERTEs stabilize unemployment rates by allowing workers to remain with their employers in highly affected sectors. However, they crowd-out labor hoarding of employers, increase the volatility of the rate of people working and, consequently, of output, and slow-down worker reallocation away from the sectors badly hit by the recession.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 16095

Classification and Topics

• Classification: Wirtschaft ; Demographic Trends, Macroeconomic Effects, and Forecasts ; Demographic Economics: Public Policy ; Labor Force and Employment, Size, and Structure ; Unemployment: Models, Duration, Incidence, and Job Search
• Subject: worker turnover ; sector diversification ; short-time work ; Great Recession ; COVID-19

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Diaz, Antonia ; Dolado, Juan J. ; Jáñez, Álvaro ; Wellschmied, Felix
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/272722
• Last update: 10.03.2025, 11:45 AM CET