Age, Industry, and Unemployment Risk During a Pandemic Lockdown

This paper models the macroeconomic and distributional consequences of lockdown shocks during the COVID-19 pandemic. The model features heterogeneous life-cycle households, labor search, employment risk, and multiple industries. We present an application to New Zealand, where the health effects of the pandemic were especially mild relative to other countries. This allows us to study the effects of lockdowns absent demand shocks induced by health concerns about the virus itself. We use model counterfactuals to study the impact of a large wage subsidy scheme implemented in New Zealand. We find that the subsidy prevented a large number of job losses, saving around 6.8\% of steady state employment. We then study the welfare consequences of several alternative fiscal interventions during the pandemic. While the wage subsidy prevents much unemployment among young households, we find that they enjoy larger welfare gains from a policy that raises unemployment benefits during the pandemic.