The heterogeneous effects of COVID-19 on labor market flows: evidence from administrative data

We investigate the short-term effects of COVID-19 on labor market flows and how they are mediated by labor market policy. Using Italian administrative data on a sample of active contracts between 2009 and the second quarter of 2020, we show that, before the pandemic, a higher share of female compared to male, young compared to old and low educated compared to high educated workers is employed in non-essential activities. When we look at the change in hirings and separations, from the 9th week of 2020 - the time when first cases and deaths due to COVID-19 were recorded -, we find a pronounced drop in hirings and endings of fixed-term contracts. Layoffs and quits increase after the 9th week, and then decline significantly, reflecting the effects of government intervention. The lifting of the lockdown triggers a slow recovery of labor market flows. Young workers, those on temporary contracts, low-educated workers, those employed in the South and those with no opportunities of working from home experience a greater decline in separation probability, indicating that government policy partly protected them from the labor market impact of the recession. The decline in the separation probability for women is lower than that for men.

Automated summary

This study investigates the short-term effects of COVID-19 on labor market flows and the role of labor market policy. Findings based on Italian administrative data reveal that before the pandemic, non-essential activities employed a higher proportion of female workers, young workers, and those with low education. Following the outbreak of COVID-19, there was a significant decline in hirings and endings of fixed-term contracts, but layoffs and quits increased initially and then declined due to government intervention. The lifting of lockdown measures led to a slow recovery of labor market flows. Government policy provided partial protection to young workers, workers on temporary contracts, low-educated workers, workers in the South, and those unable to work from home. The decline in separation probability was less severe for women compared to men.