Using two complementary approaches, this study examines the deterioration of the Korean labor market during the first 10 months of the global COVID-19 pandemic. Applying the synthetic control method, we first find that the COVID-19 outbreak has eliminated 1.1 million jobs (4.2% of nonfarm employment) nationwide in April 2020. However, a difference-in-differences approach shows that local variation in COVID-19 intensity, which captures the “regional” effect of the pandemic, explains only 9% of the national shock. The portion of the regional effect remains low until December. This is mainly because the nationwide fear and policies such as social distancing measures also have a “common” effect on local economies. Our findings suggest that the COVID-19 shock may last long in the labor market due to this common effect unless the risk of infection is completely eliminated.
Bibliographical noteFunding Information:
We are grateful to Jeffrey Clemens, Youjin Hahn, Young-Jun Chun, and seminar participants at the Korea Development Institute, Yonsei University, and the 2020 Conference of the Korean Association of Public Finance for their helpful comments. Soobin Kim provided excellent research assistance. Hee-Seung Yang acknowledges the financial support from Yonsei University , South Korea and Yongwoon Scholarship Foundation , South Korea (Yonsei- Yongwoon Research Grant No. 2021–11-0410 ). All remaining errors are ours.
© 2021 Elsevier Inc.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics