Covid-19, trade and labor

The Covid-19 pandemic and the related policy measures to limit its spread imposed strong restrictions on firms and workers. Consumption dropped forcing firms to lay off workers or to use the short-time work solutions made available by the Federal State. Firms relying on foreign products suddenly found it impossible to source inputs from abroad. Labor demand declined and job seekers were bewildered in a labor market completely different than the one they used to know.

The researchers analyze detailed firm-level information on trade and labor demand to understand how the different Covid-19 related shocks impacted the global value chain and the skill requirements. Finally, they look at the supply side of the market and study the behavior of job seekers before, during, and after the pandemic.

The literature identified a link between restrictions and the global value chain. However, little is known about the mechanisms that forced firms to revise their trading behavior leading to a structural change in the whole trading network. This structural change has repercussions on the labor market, but due to the limited availability of firm-level trade and vacancies data, there is a lack of information on how the value chain disruption heterogeneously impacted skill requirements.

The goal is to understand how the pandemic-related shock affects international trade linkages of Swiss firms and how it percolates through the labor market. The project aims to identify the labor demand and supply channels through which the trade shock impacted firms. It seeks to quantify the temporary and persistent impact of the pandemic on labor demand in terms of skill requirements. Finally, it will estimate the role of Covid-mitigation measures in unemployment insurance on workers.

While there are several studies on the impact of Covid-19 on the economy, there is no comprehensive view of its impact on three key areas: trade linkages, labor demand, and job finding. The project fills this gap by linking diverse rich data sources, identifying shocks that originated both within and outside Switzerland, and studying their impacts at the firm and the local labor market level.

The research group aims to produce high-quality research in trade and labor economics. The results can inform society and policy-makers in three ways. First, by showing how vulnerable a system can be to external trade shocks. Second, by detailing the extent of reskilling that is needed. Third, by advising on the ideal measures, like unemployment benefits, that might be used in cases of long and global labor market shocks.

Impacts of Covid-19 and policy measures on trade, labor demand, and job finding