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COVID-19 doesn’t need lockdowns to destroy jobs: The effect of local outbreaks in Korea

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  • Aum, Sangmin
  • Lee, Sang Yoon (Tim)
  • Shin, Yongseok

Abstract

Unlike most countries, Korea did not implement a lockdown in its battle against COVID-19, instead successfully relying on testing and contact tracing. Until the summer of 2020, only one region, Daegu-Gyeongbuk, had a significant number of infections, traced to a religious sect. This allows us to estimate the causal effect of the outbreak on the labor market using difference-in-differences. We find that a one per thousand increase in infections caused a 2 to 3 percent drop in local employment in the early spring. We also find that employment losses caused by local outbreaks in the absence of lockdowns were (i) mainly due to reduced hiring by small establishments, (ii) concentrated in the accommodation/food, education, real estate, and transportation industries, and (iii) worst for economically vulnerable workers who are less educated, young, in low-wage occupations, and on temporary contracts, even controlling for industry effects. These patterns are similar to what we observed in the US and UK: The unequal effects of COVID-19 were the same with or without lockdowns. Our findings are consistent with the lifting of lockdowns having led to only modest employment recoveries in the US and UK, absent larger drops in infection rates.

Suggested Citation

  • Aum, Sangmin & Lee, Sang Yoon (Tim) & Shin, Yongseok, 2021. "COVID-19 doesn’t need lockdowns to destroy jobs: The effect of local outbreaks in Korea," Labour Economics, Elsevier, vol. 70(C).
    • Handle: RePEc:eee:labeco:v:70:y:2021:i:c:s0927537121000282
    DOI: 10.1016/j.labeco.2021.101993
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    References listed on IDEAS

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    1. Coibion, Olivier & Gorodnichenko, Yuriy & Weber, Michael, 2020. "Labor Markets During the Covid-19 Crisis: A Preliminary View," Department of Economics, Working Paper Series qt7rx7t91p, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    2. Aum, Sangmin & Lee, Sang Yoon (Tim) & Shin, Yongseok, 2021. "Inequality of fear and self-quarantine: Is there a trade-off between GDP and public health?," Journal of Public Economics, Elsevier, vol. 194(C).
    3. Sangmin Aum & Sang Yoon (Tim) Lee & Yongseok Shin, 2022. "Who Should Work from Home During a Pandemic? The Wage-Infection Trade-off," Review, Federal Reserve Bank of St. Louis, vol. 104(2), pages 92-109.
    4. Cho, Janghee & Chun, Hyunbae & Lee, Yoonsoo, 2015. "How does the entry of large discount stores increase retail employment? Evidence from Korea," Journal of Comparative Economics, Elsevier, vol. 43(3), pages 559-574.
    5. Ariella Kahn-Lang & Kevin Lang, 2020. "The Promise and Pitfalls of Differences-in-Differences: Reflections on 16 and Pregnant and Other Applications," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 38(3), pages 613-620, July.
    6. Asger Lau Andersen & Emil Toft Hansen & Niels Johannesen & Adam Sheridan, 2020. "Pandemic, Shutdown and Consumer Spending: Lessons from Scandinavian Policy Responses to COVID-19," Papers 2005.04630, arXiv.org.
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    More about this item

    Keywords

    COVID-19; Regional difference-in-differences; Labor market; Inequality;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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