Labor Market Policies During an Epidemic

Serdar Birinci, Fatih Karahan, Yusuf Mercan & Kurt See
The COVID-19 pandemic has resulted in a marked slowdown of economic activity and the loss of many jobs. We look at two major policy responses designed to counteract the consequences of containment measures—the introduction of payroll subsidies and the expansion of unemployment insurance (UI)—and study their implications for the labour market and economic welfare. We develop a search model of the labour market and combine it with a standard epidemiological model. Our model features three...
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