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Pandemic Recession: L or V-Shaped?

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  • Victoria Gregory
  • Guido Menzio
  • David G. Wiczer

Abstract

We develop and calibrate a search-theoretic model of the labor market in order to forecast the evolution of the aggregate US labor market during and after the coronavirus pandemic. The model is designed to capture the heterogeneity of the transitions of individual workers across states of unemployment, employment and across different employers. The model is also designed to capture the trade-offs in the choice between temporary and permanent layoffs. Under reasonable parametrizations of the model, the lockdown instituted to prevent the spread of the novel coronavirus is shown to have long-lasting negative effects on unemployment. This is so because the lockdown disproportionately disrupts the employment of workers who need years to find stable jobs.

Suggested Citation

  • Victoria Gregory & Guido Menzio & David G. Wiczer, 2020. "Pandemic Recession: L or V-Shaped?," NBER Working Papers 27105, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:27105
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    References listed on IDEAS

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    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General

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