IDEAS home Printed from https://ideas.repec.org/p/cgd/wpaper/636.html
   My bibliography  Save this paper

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
    as

    Download full text from publisher

    File URL: https://www.cgdev.org/publication/protect-incomes-or-protect-jobs-role-social-policies-post-pandemic-recovery?utm_source=repec&utm_medium=referral&utm_campaign=repec
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kjell Erik Lommerud & Odd Rune Straume & Steinar Vagstad, 2018. "Employment Protection and Unemployment Benefits: On Technology Adoption and Job Creation in a Matching Model," Scandinavian Journal of Economics, Wiley Blackwell, vol. 120(3), pages 763-793, July.
    2. Olivier J. Blanchard & Jean Tirole, 2008. "The Joint Design of Unemployment Insurance and Employment Protection: A First Pass," Journal of the European Economic Association, MIT Press, vol. 6(1), pages 45-77, March.
    3. Saez, Emmanuel & Landais, Camille & Michaillat, Pascal, 2010. "Optimal Unemployment Insurance over the Business Cycle," CEPR Discussion Papers 8132, C.E.P.R. Discussion Papers.
    4. Bertola, Giuseppe & Rogerson, Richard, 1997. "Institutions and labor reallocation," European Economic Review, Elsevier, vol. 41(6), pages 1147-1171, June.
    5. Baily, Martin Neil, 1978. "Some aspects of optimal unemployment insurance," Journal of Public Economics, Elsevier, vol. 10(3), pages 379-402, December.
    6. Hansen, Gary D & Imrohoroglu, Ayse, 1992. "The Role of Unemployment Insurance in an Economy with Liquidity Constraints and Moral Hazard," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 118-142, February.
    7. Chetty, Raj, 2006. "A general formula for the optimal level of social insurance," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 1879-1901, November.
    8. Lars Ljungqvist, 2002. "How Do Lay--off Costs Affect Employment?," Economic Journal, Royal Economic Society, vol. 112(482), pages 829-853, October.
    9. Giuseppe Bertola, 2004. "A Pure Theory of Job Security and Labour Income Risk," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(1), pages 43-61.
    10. Shavell, Steven & Weiss, Laurence, 1979. "The Optimal Payment of Unemployment Insurance Benefits over Time," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1347-1362, December.
    11. O'Campo, Patricia & Molnar, Agnes & Ng, Edwin & Renahy, Emilie & Mitchell, Christiane & Shankardass, Ketan & St. John, Alexander & Bambra, Clare & Muntaner, Carles, 2015. "Social welfare matters: A realist review of when, how, and why unemployment insurance impacts poverty and health," Social Science & Medicine, Elsevier, vol. 132(C), pages 88-94.
    12. Hassler, John & Rodríguez Mora, José V., 2008. "Unemployment insurance design: Inducing moving and retraining," European Economic Review, Elsevier, vol. 52(5), pages 757-791, July.
    13. Cahuc, Pierre & Zylberberg, André, 2008. "Optimum income taxation and layoff taxes," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 2003-2019, October.
    14. Jose Maria Barrero & Nicholas Bloom & Steven J. Davis, 2020. "COVID-19 Is Also a Reallocation Shock," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 51(2 (Summer), pages 329-383.
    15. Karabay, Bilgehan & McLaren, John, 2011. "Pareto-improving firing costs?," European Economic Review, Elsevier, vol. 55(8), pages 1083-1093.
    16. Torben Andersen, 2012. "A Flexicurity Labour Market in the Great Recession: The Case of Denmark," De Economist, Springer, vol. 160(2), pages 117-140, June.
    17. Ravallion, Martin, 2019. "Guaranteed employment or guaranteed income?," World Development, Elsevier, vol. 115(C), pages 209-221.
    18. Boeri, Tito & Macis, Mario, 2010. "Do unemployment benefits promote or hinder job reallocation?," Journal of Development Economics, Elsevier, vol. 93(1), pages 109-125, September.
    19. Asli Demirgüç-Kunt & Michael Lokshin & Iván Torre, 2021. "Opening-Up Trajectories and Economic Recovery: Lessons after the First Wave of the COVID-19 Pandemic," CESifo Economic Studies, CESifo Group, vol. 67(3), pages 332-369.
    20. Edward P. Lazear, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(3), pages 699-726.
    21. Bottan, Nicolas & Hoffmann, Bridget & Vera-Cossio, Diego A., 2021. "Stepping up during a crisis: The unintended effects of a noncontributory pension program during the Covid-19 pandemic," Journal of Development Economics, Elsevier, vol. 150(C).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Michael Lokshin & Martin Ravallion & Iván Torre, 2022. "Is Social Protection a Luxury Good?," NBER Working Papers 30484, National Bureau of Economic Research, Inc.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kjell Erik Lommerud & Odd Rune Straume & Steinar Vagstad, 2018. "Employment Protection and Unemployment Benefits: On Technology Adoption and Job Creation in a Matching Model," Scandinavian Journal of Economics, Wiley Blackwell, vol. 120(3), pages 763-793, July.
    2. Philip Jung & Keith Kuester, 2015. "Optimal Labor-Market Policy in Recessions," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(2), pages 124-156, April.
    3. Raj Chetty & Amy Finkelstein, 2012. "Social Insurance: Connecting Theory to Data," NBER Working Papers 18433, National Bureau of Economic Research, Inc.
    4. Michau, Jean-Baptiste, 2015. "Optimal labor market policy with search frictions and risk-averse workers," Labour Economics, Elsevier, vol. 35(C), pages 93-107.
    5. Walter Nicholson & Karen Needels, "undated". "The EUC08 Program in Theoretical and Historical Perspective," Mathematica Policy Research Reports 9046cb11c3aa44c8a036a6e38, Mathematica Policy Research.
    6. Jonas Kolsrud & Camille Landais & Peter Nilsson & Johannes Spinnewijn, 2015. "The Optimal Timing of UI Benefits: Theory and Evidence from Sweden," CEP Discussion Papers dp1361, Centre for Economic Performance, LSE.
    7. Fu, Hu & Kleinberg, Robert & Lavi, Ron & Smorodinsky, Rann, 2017. "Job security, stability and production efficiency," Theoretical Economics, Econometric Society, vol. 12(1), January.
    8. L'Haridon, Olivier & Malherbet, Franck, 2009. "Employment protection reform in search economies," European Economic Review, Elsevier, vol. 53(3), pages 255-273, April.
    9. Euiyoung Jung, 2021. "On the design of labor market programs as stabilization policies," Working Papers halshs-03243698, HAL.
    10. Jonas Kolsrud & Camille Landais & Peter Nilsson & Johannes Spinnewijn, 2018. "The Optimal Timing of Unemployment Benefits: Theory and Evidence from Sweden," American Economic Review, American Economic Association, vol. 108(4-5), pages 985-1033, April.
    11. Alonso-Borrego, César & Fernández-Villaverde, Jesús & Galdon-Sanchez, Jose Enrique, 2004. "Evaluating Labor Market Reforms: A General Equilibrium Approach," IZA Discussion Papers 1129, Institute of Labor Economics (IZA).
    12. Camille Landais, 2015. "Assessing the Welfare Effects of Unemployment Benefits Using the Regression Kink Design," American Economic Journal: Economic Policy, American Economic Association, vol. 7(4), pages 243-278, November.
    13. Pissarides, Christopher, 2002. "Consumption and savings with unemployment risk: implications for optimal employment contracts," LSE Research Online Documents on Economics 2211, London School of Economics and Political Science, LSE Library.
    14. Christian Keuschnigg & Thomas Davoine, 2010. "Flexicurity and Job Reallocation," University of St. Gallen Department of Economics working paper series 2010 2010-11, Department of Economics, University of St. Gallen.
    15. Pissarides, Christopher, 2002. "Consumption and Savings with Unemployment Risk: Implications for Employment Contracts," CEPR Discussion Papers 3367, C.E.P.R. Discussion Papers.
    16. Parsons, Donald O., 2016. "Moral-Hazard-Free First-Best Unemployment Insurance," IZA Discussion Papers 9824, Institute of Labor Economics (IZA).
    17. Pietro Reichlin, 2019. "Social Security and Old Age Unemployment Risk with Efficient Wage Bargaining," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(3), pages 1125-1153, July.
    18. Walter Nicholson & Karen Needels & Heinrich Hock, 2014. "Unemployment Compensation During the Great Recession: Theory and Evidence," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(1), pages 187-218, March.
    19. Tito Boeri & Jan van Ours, 2013. "The Economics of Imperfect Labor Markets: Second Edition," Economics Books, Princeton University Press, edition 1, number 10142.
    20. Euiyoung Jung, 2021. "On the design of labor market programs as stabilization policies," PSE Working Papers halshs-03243698, HAL.

    More about this item

    Keywords

    Pandemic; labor market policies; social protection; cash transfers; unemployment insurance; job retention;
    All these keywords.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cgd:wpaper:636. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Publications Manager (email available below). General contact details of provider: https://edirc.repec.org/data/cgdevus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.