EN



DOI:  https://doi.org/10.52903/wp2022295


DID COVID-19 INDUCE A REALLOCATION WAVE?

Agostino Consolo
European Central Bank

Filippos Petroulakis
Bank of Greece


Abstract

Recent research has argued that the COVID-19 shock has also brought about a reallocation shock. We examine the evidence for such an occurrence in the United States, taking a broad perspective. We first consider micro data from CPS and JOLTS; there is no noticeable uptick in occupation or sector switches, nor churn, either at the aggregate level or the cross-section, or when broken down by firms’ size. We then examine whether mismatch unemployment has risen as a result of the pandemic; using an off-the-shelf multisector search and matching model, there is little evidence for an important role for mismatch in driving the elevated unemployment rate. Finally, we employ a novel Bayesian SVAR framework with sign restrictions to identify a reallocation shock; we find that it has played a relatively minor role in explaining labor market patterns in the pandemic, at least relative to its importance in earlier episodes.

Keywords: Reallocation, COVID-19, mismatch

JEL-Classification: E24, J63.

Acknowledgement: We would like to thank an anonymous referee, Renato Faccini, Matthias Hertweck, Ioannis Kospentaris, Theodora Kosma, Nicholas Kozeniauskas, Dimitris Louzis, Myrto Oikonomou, Eugenia Vella and Ernesto Villanueva, as well as participants at the 5th ESCB Research Cluster 2 workshop for helpful comments and discussions. All errors are ours. The views expressed in this paper are those of the authors alone and may not necessarily represent those of Bank of Greece, the European Central Bank or the Eurosystem.

Correspondence:
Filippos Petroulakis
Bank of Greece
21 E. Venizelos Ave.
10250, Athens
Tel: 210- 3202416
email: fpetroulakis@bankofgreece.gr


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