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The Economic Ripple Effects of COVID-19 / Francisco J. Buera.
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
View online- Format:
- Book
- Government document
- Author/Creator:
- Buera, Francisco J.
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Business Cycles and Stabilization Policies.
- Coronavirus.
- COVID-19.
- Economic Shock.
- Employment.
- Employment Subsidy.
- Firm Dynamics.
- Labor Markets.
- Lockdown.
- Macroeconomics and Economic Growth.
- Private Sector Development.
- Private Sector Economics.
- Resource Reallocation.
- Social Protections and Labor.
- Local Subjects:
- Business Cycles and Stabilization Policies.
- Coronavirus.
- COVID-19.
- Economic Shock.
- Employment.
- Employment Subsidy.
- Firm Dynamics.
- Labor Markets.
- Lockdown.
- Macroeconomics and Economic Growth.
- Private Sector Development.
- Private Sector Economics.
- Resource Reallocation.
- Social Protections and Labor.
- Physical Description:
- 1 online resource (42 pages)
- Place of Publication:
- Washington, D.C. : The World Bank, 2021.
- System Details:
- data file
- Summary:
- What are the effects of a large temporary shock to the economy such as a temporary lockdown in response to a pandemic? Are the effects propagated and made persistent by firms' deteriorating balance sheets and labor market frictions? This paper develops a model with financial market and labor market frictions to answer these questions. The model makes quantitative predictions about the effect on output, employment and firm dynamics from lockdowns of varying magnitude and duration. It finds that the effects are not persistent despite the deterioration of the financial soundness of non-essential firms and labor market frictions, if (i) laid-off workers can be recalled by their previous employers without having to go through the frictional labor market and (ii) the government provides employment subsidies to firms during lockdown. However, the effect are heterogeneous and young non-essential firms are disproportionately affected. In addition, if lockdowns lead to more permanent reallocation across industries, the recession becomes more protracted.
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