Pandemic Recession: L or V-Shaped?

23 Pages Posted: 12 May 2020 Last revised: 23 Jan 2022

See all articles by Victoria Gregory

Victoria Gregory

New York University (NYU) - New York University

Guido Menzio

New York University (NYU)

David Wiczer

State University of New York (SUNY), Stony Brook

Date Written: May 2020

Abstract

We develop and calibrate a search-theoretic model of the labor market in order to forecast the evolution of the aggregate US labor market during and after the coronavirus pandemic. The model is designed to capture the heterogeneity of the transitions of individual workers across states of unemployment, employment and across different employers. The model is also designed to capture the trade-offs in the choice between temporary and permanent layoffs. Under reasonable parametrizations of the model, the lockdown instituted to prevent the spread of the novel coronavirus is shown to have long-lasting negative effects on unemployment. This is so because the lockdown disproportionately disrupts the employment of workers who need years to find stable jobs.

Suggested Citation

Gregory, Victoria and Menzio, Guido and Wiczer, David, Pandemic Recession: L or V-Shaped? (May 2020). NBER Working Paper No. w27105, Available at SSRN: https://ssrn.com/abstract=3597837

Victoria Gregory (Contact Author)

New York University (NYU) - New York University

Guido Menzio

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
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David Wiczer

State University of New York (SUNY), Stony Brook

Health Science Center
Stony Brook, NY 11794
United States

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