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

Author

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  • Paul Jackson

    (National University of Singapore)

  • Victor Ortego-Marti

    (Department of Economics, University of California Riverside)

Abstract

We integrate the SIR epidemiology model into a search and matching framework in which workers lose human capital during unemployment. As the number of infections rises, fewer jobs are created, the unemployment rate increases and the composition of skills among the unemployed deteriorates, thereby reducing TFP. We calibrate the model to quantify the effect of a three month lockdown on TFP through loss of skill during unemployment. Sixty-two weeks after the pandemic begins, TFP reaches its lowest value with a decline of 0.56%, which is nearly 50% of the productivity losses typically seen in recessions.

Suggested Citation

  • Paul Jackson & Victor Ortego-Marti, 2020. "Skill Loss during Unemployment and the Scarring Effects of the COVID-19 Pandemic," Working Papers 202020, University of California at Riverside, Department of Economics.
    • Handle: RePEc:ucr:wpaper:202020
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    Keywords

    COVID-19; Skill loss; TFP; Search and matching; Unemployment; Pandemics;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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