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Labor market effects of COVID-19 shocks

Author

Listed:
  • Frenkel Michael

    (WHU – Otto Beisheim School of Management, Vallendar, Germany)

  • Stadtmann Georg

    (European University Viadrina, Frankfurt (Oder), Germany; University of Southern Denmark, Odense M, Denmark.)

  • Zimmermann Lilli

    (Deutsche Bundesbank, University of Applied Sciences, Hachenburg, Germany)

Abstract

We study the impact of several Covid-19 related supply shocks. We use a standard wage setting-price setting model of the labor market and analyze the transmission of the shocks to the natural rate of unemployment and production. In a first step, the shocks are analyzed in a general way, graphically and algebraically. In a second step, numerical examples illustrate the effects on the real wage and the labor market equilibrium as well as output. Our theoretical results indicate that the negative supply shocks related to the Covid-19 pandemic are associated with a decline in the natural level of output and employment. Our results are supported by empirical evidence across various countries. However, limitations of the theoretical model can be considerable.

Suggested Citation

  • Frenkel Michael & Stadtmann Georg & Zimmermann Lilli, 2023. "Labor market effects of COVID-19 shocks," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 59(1), pages 3-12, March.
    • Handle: RePEc:vrs:ijomae:v:59:y:2023:i:1:p:3-12:n:7
    DOI: 10.2478/ijme-2023-0001
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    References listed on IDEAS

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    More about this item

    Keywords

    labor market; natural rate of unemployment; supply shocks;
    All these keywords.

    JEL classification:

    • A22 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Undergraduate
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General

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