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Protect Incomes or Protect Jobs? The Role of Social Policies in Post-pandemic Recovery

Author

Listed:
  • Asli Demirgüç-Kunt

    (Center for Global Development)

  • Michael Lokshin

    (World Bank)

  • Iván Torre

    (World Bank)

Abstract

This paper examines the effectiveness of income protection and job protection policies for the post-pandemic economic recovery of the second half of 2020 through 2021. The paper is based on a new dataset of the budgets of social protection programs implemented as a part of the pandemic stimulus package in 154 countries. The empirical analysis shows that, in the short run, higher expenditure on job protection measures is associated with more robust GDP growth, increased employment, and decreased inactivity and poverty rates compared to the expansion of income protection programs. Both policies had a significant economic impact only in countries with weaker pre-pandemic social insurance systems. In countries with broader coverage of the social insurance system, the income and job protection programs appear to have a limited impact on post-pandemic recovery. Because the structural economic changes induced by the pandemic are expected to fully materialize in several years, more research is needed to understand the longer-term effects of job protection and income protection policies on labor markets and economic recovery.

Suggested Citation

  • Asli Demirgüç-Kunt & Michael Lokshin & Iván Torre, 2023. "Protect Incomes or Protect Jobs? The Role of Social Policies in Post-pandemic Recovery," Working Papers 636, Center for Global Development.
    • Handle: RePEc:cgd:wpaper:636
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    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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