Is the Cure Worse than the Problem Itself? Immediate Labor Market Effects of Covid-19 Case Rates and School Closures in the U.S

17 Pages Posted: 12 May 2020 Last revised: 15 Aug 2022

See all articles by Felipe Lozano-Rojas

Felipe Lozano-Rojas

University of Georgia

Xuan Jiang

The Ohio State University

Laura Montenovo

Indiana University

Kosali Ilayperuma Simon

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA); National Bureau of Economic Research (NBER)

Bruce A. Weinberg

Ohio State University (OSU) - Economics; IZA Institute of Labor Economics; National Bureau of Economic Research (NBER)

Coady Wing

Indiana University

Date Written: May 2020

Abstract

The relationship between population health and measures of economic well-being and economic activity is a long standing topic in health economics (Preston, 1975; Cutler, Deaton, and Lleras-Muney, 2006; Ruhm, 2000). The conceptual issues in analyzing the complicated link between health and economic well-being are central to understanding the implications of the COVID-19 epidemic in the United States The public health shock of the epidemic has direct economic impacts, but the mitigation policies governments are using to control the spread of the virus may also damage economic activity. We estimate how state job market conditions respond to state COVID-19 infections and school closures, which are the earliest of the major mitigation policies. Mitigation policies and local epidemiological conditions explain some of the variation in unemployment patterns. However, the historically unprecedented increase in new UI claims during the weeks of March 15-21 and March 22-28 was largely across-the-board and occurred in all states. This suggests most of the economic disruption was driven by the health shock itself. Put differently, it appears that the labor market slowdown was due primarily to a nationwide response to evolving epidemiological conditions and that individual state policies and own epidemiologic situations have had a comparatively modest effect.

Suggested Citation

Lozano-Rojas, Felipe and Jiang, Xuan and Montenovo, Laura and Simon, Kosali Ilayperuma and Weinberg, Bruce A. and Wing, Coady, Is the Cure Worse than the Problem Itself? Immediate Labor Market Effects of Covid-19 Case Rates and School Closures in the U.S (May 2020). NBER Working Paper No. w27127, Available at SSRN: https://ssrn.com/abstract=3597859

Felipe Lozano-Rojas (Contact Author)

University of Georgia ( email )

Baldwin Hall, 355 S Jackson St
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Athens, GA 30602
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HOME PAGE: http://felipelozanorojas.com

Xuan Jiang

The Ohio State University ( email )

United States

Laura Montenovo

Indiana University

107 S Indiana Ave
100 South Woodlawn
Bloomington, IN 47405
United States

Kosali Ilayperuma Simon

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
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Bruce A. Weinberg

Ohio State University (OSU) - Economics ( email )

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614-292-6701 (Phone)
614-292-3906 (Fax)

IZA Institute of Labor Economics

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Germany

National Bureau of Economic Research (NBER)

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United States

Coady Wing

Indiana University ( email )

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