The Long Downturn: The Impact of the Great Lockdown on Formal Employment

Abstract

In this paper, we use administrative data covering Mexico's formal labor market to investigate the employment effects of the Great Lockdown (GL). Our results show that the COVID-19 pandemic and lockdown caused Mexico's formal sector to contract by 5% by November of 2020. By August, men's jobs started to recover, while women's jobs remain stagnant. We then document heterogeneous effects by age, income, size of the firms, and economic sector activity. The most affected economic agents during the pandemic include the youngest workers (15 to 29-years-old), oldest workers (over 60 years old), low-income earners, small-sized firms (6-50 workers), medium-sized firms (51-250 workers), workers in the construction industry, and the hospitality-focused service sectors. Finally, we test different state-level factors that may explain heterogeneity within Mexico: state-level reopenings and lockdowns, infection risk, and stimulus payments. Our findings suggest more considerable employment losses in states that experienced successive lockdowns.

Keywords: COVID-19, Labor, Latin America, Mexico

JEL Classification: J21, J63, J64