Working Paper: NBER ID: w27908
Authors: Sangmin Aum; Sang Yoon; Tim Lee; Yongseok Shin
Abstract: Shutting down the workplace is an effective means of reducing contagion, but can incur large economic losses. We construct an exposure index, which measures infection risks across occupations, and a work-from-home index, which gauges the ease with which a job can be performed remotely across both industries and occupations. Because the two indices are negatively correlated but distinct, the economic costs of containing a pandemic can be minimized by only sending home those jobs that are highly exposed but easy to perform from home. Compared to a lockdown of all non-essential jobs, the optimal policy attains the same reduction in aggregate exposure (32 percent) with one-third fewer workers sent home (24 vs. 36 percent) and with only half the loss in aggregate wages (15 vs. 30 percent). A move from the lockdown to the optimal policy reduces the exposure of low-wage workers the most and the wage loss of the high-wage workers the most, although everyone's wage losses become smaller. A constrained optimal policy under which health workers cannot be sent home still achieves the same exposure reduction with a one-third smaller loss in aggregate wages (19 vs. 30 percent).
Keywords: COVID-19; Work from Home; Economic Policy; Pandemic
JEL Codes: E24; I14; J21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| shutting down workplaces (J63) | reduces contagion (E44) |
| shutting down workplaces (J63) | incurs significant economic losses (Q54) |
| exposure index and work-from-home index (C43) | negatively correlated (C10) |
| selectively sending home workers (J63) | minimizes economic costs (D61) |
| selectively sending home workers (J63) | reduction in aggregate exposure (D18) |
| low-wage workers (J46) | experience most reduction in exposure under optimal policy (G52) |
| high-wage workers (J31) | experience most significant wage gains (J31) |
| constrained optimal policy (health workers not sent home) (J68) | significant reduction in exposure (Y60) |
| constrained optimal policy (C61) | smaller wage loss compared to lockdown (J65) |
| targeting specific occupations (J68) | substantially reduce economic costs while maintaining health safety (I10) |