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Measuring Labor Supply and Demand Shocks during COVID-19


Abstract: We measure labor demand and supply shocks at the sector level around the COVID-19 outbreak by estimating a Bayesian structural vector autoregression on monthly statistics of hours worked and real wages. Most sectors were subject to large negative labor supply and demand shocks in March and April, with substantial heterogeneity in the size of shocks across sectors. Our estimates suggest that two-thirds of the drop in the aggregate growth rate of hours in March and April 2020 are attributable to labor supply. We validate our estimates of supply shocks by showing that they are correlated with sectoral measures of telework.

Keywords: Supply and Demand Shocks; COVID-19; Structural Vector Autoregressions; Sign Restrictions;

JEL Classification: E24; E30; J20;

https://doi.org/10.20955/wp.2020.011

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Provider: Federal Reserve Bank of St. Louis

Part of Series: Working Papers

Publication Date: 2021-07

Number: 2020-011

Note: Publisher DOI: https://doi.org/10.1016/j.euroecorev.2021.103901

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