COVID-19 Is Also a Reallocation Shock

By Jose Maria Barrero, Nicholas Bloom, Steven J. Davis. Brookings Papers on Economic Activity, 2020

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ABSTRACT:We develop several pieces of evidence about the reallocative effects of the COVID-19 shock on impact and over time. First, the shock caused three to four new hires for every ten layoffs from March 1 to mid-May 2020. Second, we project that one-third or more of the layoffs during this period are permanent in the sense that job losers won't return to their old jobs at their previous employers. Third, firm-level forecasts at a one-year horizon imply rates of expected job and sales reallocation that are two to five times larger from April to June 2020 than before the pandemic. Fourth, full days working from home will triple from 5 percent of all workdays in 2019 to more than 15 percent after the pandemic ends. We also document pandemic-induced job gains at many firms and a sharp rise in cross-firm equity return dispersion in reaction to the pandemic. After developing the evidence, we consider implications for the economic outlook and for policy. Unemployment benefit levels that exceed worker earnings, policies that subsidize employee retention irrespective of the employer's commercial outlook, and barriers to worker mobility and business formation impede reallocation responses to the COVID-19 shock.

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Citations in the corpus

COVID-19 and SME Failures (2020, result): “Fourth, we are similar to papers such as Barrero et al. (2020); Guerrieri, Lorenzoni, Straub and Werning (2020); Krueger, Uhlig and Xie (2020), in spirit as they explore the distinction between the demand and supply component of the COVID-19 shock, and the sectoral reallocation it in-”
The Impact of COVID-19 on US Firms (2021, background): “…2020, Papaniklaou and Schmidt 2020, and Buffington et al. 2020), labor markets (e.g. Chetty et al. 2020, Kahn et al. 2020, Cajner et al. 2020 and Barrero et al. 2020b), and its particularly damaging impact on women and lower educated groups (e.g. Adams-Prassl et al. 2020, Alon et al. 2020,…”
A literature review of the economics of COVID‐19 (2020, unknown): “Barrero et al. (2020) measure the reallocation of labor in response to the pandemic-induced demand response (e.g., increased hiring by delivery companies, delivery-oriented restaurant/fast food chains, technology companies).”
Why Working from Home Will Stick (2020, methodology): “1 Drawing on several independently conducted surveys, Barrero et al. (2020), Bick et al. (2020), Brynjolfsson et al. (2020), and Ozimek (2020) find that about half of paid workhours were supplied from home in the Spring of 2020.”
Flatten the Curve and Stock Market Liquidity – An Inquiry into Emerging Economies (2020, background): “COVID-19 not only induced unprecedented uncertainty in the financial markets (Baker et al. 2020; Narayan and Phan 2020) but also caused substantial shifts in real demand patterns and business practices (Barrero, Bloom, and Davis 2020).”
Unmasking the Impact of COVID-19 on Businesses : Firm Level Evidence from across the World (2020, background): “Uncertainty As discussed in recent work by Altig et al. (2020a); Barrero et al. (2020), COVID-19 represents a fundamental shock to the economy through the uncertainty that it injected among economic actors.17 This uncertainty depends primarily on health related aspects (i.e. mortality rate…”
The US Labor Market during the Beginning of the Pandemic Recession (2020, background): “(2020a), Barrero et al. (2020), Bick and Blandin (2020), Brynjolfsson et al. (2020), Chetty et al. (2020), Dingel and Neiman (2020), Coibion et al.”
The impact of the COVID-19 pandemic on business expectations (2021, background): “…starting in April 2020 as a supplement to our 16 See Chetty et al. (2020) or visit tracktherecovery.org; Homebase data at https://joinhomebase.com/blog/an-update-on-small-businessas-covid-19-cases-rise/; Cajner et al. (2020); and Barrero, Bloom, and Davis (2020). core survey questionnaire.”
Economic uncertainty before and during the COVID-19 pandemic (2020, background): “On potentialmedium- and long-termmacroeconomic consequences, see Barrero et al. (2020), Barro et al. (2020) and Jorda et al. (2020). certainty before and during the COVID-19 pandemic, Journal of Public able 1 easures of uncertainty for the COVID-19 crisis.”