Is Job Preservation too Expensive? An Estimate of the Effects of the Covid Pandemic and the Economic Policy Response on the Labour Market

Abstract

The Covid-19 pandemic triggered a massive economic policy response in all developed countries. There were various approaches that governments adopted with a variety of possible aims and outcomes. In our research we focus on estimating the effects of Covid-19 on the Czech Republic, a small open economy, which was typical in that it had high mortality, a long lockdown and a focus on job preservation. Using three different methods – input-output, CGE and ADL, we estimate the industry-level impact of the pandemic, taking induced effects into account. We show that, besides industries that were explicitly harmed like accommodation or transportation, some industries like construction seem to be implicitly vulnerable as well. This is an important finding especially for any future policy responses. Regarding the economic policy itself, we conclude that it was successful in terms of preserving jobs, but the expenditures were probably too high to call it an efficient policy response.

Keywords

• labor market
• economic policy
• covid pandemic
• cge model
• econometrics