Measuring Labor Supply and Demand Shocks During Covid-19

36 Pages Posted: 19 May 2020

See all articles by Pedro Brinca

Pedro Brinca

Nova School of Business and Economics; CEF.UP

João B. Duarte

New University of Lisbon - Nova School of Business and Economics

Miguel Faria-e-Castro

Federal Reserve Bank of St. Louis

Date Written: May, 2020

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 2020, 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

Suggested Citation

Brinca, Pedro and Duarte, João B. and Faria-e-Castro, Miguel, Measuring Labor Supply and Demand Shocks During Covid-19 (May, 2020). Available at SSRN: https://ssrn.com/abstract=3601938 or http://dx.doi.org/10.20955/wp.2020.011

Pedro Brinca (Contact Author)

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

HOME PAGE: http://htttp://www.pedrobrinca.pt

CEF.UP ( email )

Rua Dr. Roberto Frias
Porto, 4200-464
Portugal

João B. Duarte

New University of Lisbon - Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

Miguel Faria-e-Castro

Federal Reserve Bank of St. Louis ( email )

411 Locust St
Saint Louis, MO 63011
United States

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