Cost of Zero-Covid: Effects of Anti-Contagious Policy on Labor Market Outcomes in China
72 Pages Posted: 23 Feb 2022 Last revised: 9 Dec 2022
Date Written: December 9, 2022
We investigate the effect of the anti-contagious policy on labor market outcomes in China. By exploiting randomly emerged new cases of COVID-19 in a 14-day observation window, we construct a conditionally exogenous measurement for the duration of the zero-Covid policy in China. A 10% increase (3.7 days on average) in the duration of the zero-Covid policy increases the probability of unemployment by around 0.1. In contrast to most large economies that suffered a severe health shock from the COVID-19 pandemic, China effectively contained the scale and the spread of the initial outbreak in 2020 to the minimum level and avoided an overwhelmed and overloaded health system, which provides a unique empirical setting to examine the policy effect of anti-contagious policies. We show that the disruption in the labor market majorly results from the zero-Covid containment policy, while health shocks are trivial on the labor market outcomes. Moreover, the zero-Covid policy decreases the labor income and working hours for employed individuals, and the policy effect is heterogeneous by gender, age, education, pre-shock income, and having a young child. We examine the policy effect during different phases of the pandemic and find that the stringent clearance during the first stage of the pandemic, rather than the subsequent dynamic clearance strategy, had the negative impact on labor market outcomes.
Keywords: COVID-19, Zero-COVID policy, unemployment, labor market
JEL Classification: I12, J20, J18
Suggested Citation: Suggested Citation