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How does the Covid‐19 pandemic affect regional labor markets and why do large cities suffer most?

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  • Silke Hamann
  • Annekatrin Niebuhr
  • Duncan Roth
  • Georg Sieglen

Abstract

We estimate the spatially heterogeneous effects of the coronavirus disease 2019 pandemic on labor market dynamics in Germany until December 2021. While initially slightly stronger in rural regions and large agglomerations, adverse effects quickly become more pronounced and persistent in large agglomerations compared to all other region types. We ascribe the larger impact of the pandemic in large agglomerations to two factors. First, a combination of a higher share of skilled workers and jobs suitable for working from home is positively related to an increased inflow rate into unemployment. We argue that local spillover effects from reduced product market demand in large cities caused by changes in behavior such as working from home or online shopping are a possible explanation. Second, some of our results suggest that a lower outflow rate out of unemployment is associated with a higher precrisis unemployment rate in large agglomerations. This might reflect the less favorable composition of unemployment in large cities, which reduces the probability of transitions into employment during crises.

Suggested Citation

  • Silke Hamann & Annekatrin Niebuhr & Duncan Roth & Georg Sieglen, 2023. "How does the Covid‐19 pandemic affect regional labor markets and why do large cities suffer most?," Journal of Regional Science, Wiley Blackwell, vol. 63(5), pages 1228-1250, November.
    • Handle: RePEc:bla:jregsc:v:63:y:2023:i:5:p:1228-1250
    DOI: 10.1111/jors.12662
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    Cited by:

    1. Böhme, Stefan & Eigenhüller, Lutz & Rossen, Anja & Straßer, Felicitas, 2023. "Entwicklung von Beschäftigung und Arbeitslosigkeit im Arbeitsagenturbezirk München," IAB-Regional. Berichte und Analysen aus dem Regionalen Forschungsnetz. IAB Bayern 202301, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

    More about this item

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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