Impacts of Covid-19 and policy measures on trade, labor demand, and job finding

Firms and workers in the labor market have been buffeted by many shocks during the Covid-19 crisis. The risk of the illness itself, the government measures to curb the pandemic, and support measures, many of these were directed at firms and workers. Already before the Covid-19 crisis, the labor market experienced a longer run but profound structural change with digitalization changing the opportunities and costs of many of the tasks workers perform. Firms are central for the economic and social fabric of society. Firms are social environments where workers exchange ideas, and representatives of firms meet potential customers. Because of their social nature, firms became the object of some of the government measures attempting to diminish contagion of the new SARS-COV-2 virus, e.g. restrictions on gatherings, home office mandates, business closures, curfews, and other types of lockdowns. In order to make these harsh policies viable, governments also introduced an extraordinary amount of supportive measures, e.g. credits or transfers to firms experiencing hard-ship, extensions of unemployment benefits, etc. This proposal provides three studies on the key forces on firms' trading behavior, their demand for new workers, and individuals' job finding outcomes. The first study focuses on Swiss firms' trade connections with other countries. Many firms in Switzerland export their products or source key inputs on the international market. Trade flows are important with both imports and exports standing at around one-third of Swiss GDP. The first wave of Covid-19 and associated government measures severely restricted worldwide trade flows (Baldwin, 2020). Using data on all transactions between Swiss firms and all their trading partners, we study how imports and exports by firms in Switzerland were affected by Swiss measures, and by those taken by trading partners. We study the effects of measures on overall trade and decompose the effects into those that occur through firms that stop trading (extensive margin), or reductions in volume among firms that continue to trade (intensive margin). This analysis provides central information for a small open economy, like Switzerland. Changes in trade flows might also have important ramifications on the labor market. The second study analyzes how Covid-19 and policy measures affected labor demand as expressed in job vacancies. Digitalization exerts strong pressure on the labor markets around the world (Deming and Kahn, 2015), and Covid-19 might have accelerated its impacts on the Swiss labor market. Job vacancies provide information both on the volume of labor demand, and its nature, through the listed skills that are required. The Covid-19 crisis likely affected the demand for work along several dimensions: can the job be performed from home, is the job in sectors that have high demand (health), or high customer contact (restaurants), implicit gender bias (because of school closures). We analyze the universe of job vacancies posted online in Switzerland and pay particular attention to overall behavior and also the specific considerations. This study documents how firms' labor demand was affected by Covid-19, related policy measures, and trade disruptions in the context of a structural change. Third, job seekers were directly affected by imploding and/or changing labor demand, and supported through benefit extensions and provisions lowering search requirements. We use data on the universe of job seekers in Switzerland to better understand how job finding outcomes were affected by Covid-19 and policy measures. Firm closures or firms with short-time work can not hire, so labor demand is likely to be lower. Trade shocks also affect labor demand. Extended benefits provide income during times of difficult job search. We are interested in seeing whether these events affected job finding duration, whether job seekers accepted to work in different occupations, and how imported shocks, through trade, changed job finding. These analyses provide an assessment of the effects of Covid-19 on job seekers, a key and vulnerable group in the labor market. This project contributes to module 3 of the NFP 80 call through its focus on the impacts of Covid-19 and measures on the labor market in a context of structural change, with evidence on the direct impacts of pandemic and supportive measures, of the pandemic, and international spillovers. The research team has extensive expertise in Covid-19 and is connected to a network of national institutions (Swiss National Bank and KOF) and international institutions (Ohio State). All data cited in this proposal is already available and has been used in other unrelated work.