Working Paper: NBER ID: w27127
Authors: Felipe Lozano Rojas; Xuan Jiang; Laura Montenovo; Kosali I. Simon; Bruce A. Weinberg; Coady Wing
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.
Keywords: COVID-19; Labor Market; Unemployment Insurance; School Closures
JEL Codes: I1; J2; J6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| School closures (I21) | COVID-19 case rates (Y10) |
| COVID-19 case rates (Y10) | Unemployment Insurance claims (J65) |
| School closures (I21) | Unemployment Insurance claims (J65) |
| Health shock (COVID-19) (I12) | Unemployment Insurance claims (J65) |