Evaluating the effectiveness of labor market interventions on reducing the impacts of the COVID‐19 pandemic

• Published date: 01 February 2023
• Author: Ceyhun Elgin,Colin Williams,Gamze Öz Yalaman
• Date: 01 February 2023
• DOI: http://doi.org/10.1111/rode.12938

REGULAR ARTICLE

Evaluating the effectiveness of labor market

interventions on reducing the impacts of the

COVID-19 pandemic

Ceyhun Elgin

1,2

| Colin Williams

3

| Gamze Öz Yalaman

4

1

Department of Economics, Bogazici

University, Istanbul, Turkey

2

Department of Economics, American

University in Bulgaria, Blagoevgrad,

Bulgaria

3

Management School, University of

Sheffield and European Labor Authority,

Sheffield, UK

4

Department of Public Finance, Eskisehir

Osmangazi University, Eskis¸ehir, Turkey

Correspondence

Ceyhun Elgin, Department of Economics,

Bogazici University, Natuk Birkan Kat

2 Bebek, 34342 Istanbul, Turkey.

Email: ceyhun.elgin@boun.edu.tr

Abstract

This paper evaluates whether different labor market policy

interventions taken in response to the COVID-19 pan-

demic have been effective in reducing its adverse impacts.

We construct a database covering 165 countries and

39 labor market interventions grouped into four pillars:

stimulating the economy and jobs (pillar 1); supporting

enterprises, employment, and incomes (pillar 2); protecting

workers (pillar 3); and social dialogue (pillar 4). The results

revealed that measures taken under pillars 1, 2, and 3 have

reduced the impacts of the pandemic on economic growth;

measures under pillar 4 were significantly associated with

reducing its impacts on employment and those under pil-

lar 2 with reducing its impacts on working hours.

KEYWORDS

COVID-19, labor market measures, pandemic

1|INTRODUCTION

The coronavirus (COVID-19) outbreak emerged in Wuhan, China, in December 2019 and still

persists globally. The COVID-19 pandemic has spread to 213 countries and territories, resulting

in more than 366 million cases and 6 million deaths as of the end of February 2022. In addition

to human suffering and loss of lives, the outbreak generated a major global economic down-

turn. Without any exceptions, almost all economies, including the world's largest ones, have

been affected negatively with mass layoffs, deepened economic inequality, and social stratifica-

tion (Avgar, Eaton, Givan, & Litwin, 2020), as well as radical changes in traditional work

arrangements due to quarantine arrangements (Hodder, 2020). According to estimates by the

International Labor Organization (ILO, 2020a), 81% of the global workforce witnessed the full

Received: 29 October 2021 Revised: 28 February 2022 Accepted: 2 September 2022

DOI: 10.1111/rode.12938

352 © 2022 John Wiley & Sons Ltd. Rev Dev Econ. 2023;27:352–374.wileyonlinelibrary.com/journal/rode

or partial closure of their workplaces (ILO, 2020b) at some point during the pandemic. To miti-

gate the negative effects of the pandemic on the economy, governments have adopted various

economic packages, including fiscal, monetary, and macro-financial policy measures. These

economic measures targeting households, firms, and health systems vary across countries in

breadth and scope; however, overall, according to Elgin, Basbug, and Yalaman (2020) the aver-

age size of the packages is unprecedented in the economic history of the world.

The aim of this paper is to evaluate the effectiveness of these economic packages/different

labor market interventions in mitigating the impacts of the COVID-19 pandemic and whether the

pandemic has had a greater impact on some countries rather than others. To assess the labor mar-

ket interventions taken in 165 countries globally, the ILO have been tracking (ILO, 2020c)the

labor market measures taken by governments across four pillars: (1) stimulating the economy and

jobs (e.g., financial support to sectors, including the health-care sector); (2) supporting enterprises,

employment, and incomes (e.g., extending social protection and implementing employment reten-

tion policies); (3) protecting workers in the workplace (e.g., expanding access to paid leave and

strengthening health and safety measures); and (4) using social dialogue between governments,

employers, and workers (e.g., tripartite meetings). Examining whether countries had adopted the

39 labor market measures under these four pillars, this paper evaluates whether this influenced

the impacts of the pandemic on the labor market of countries, measured here in terms of annual

gross domestic product (GDP) growth, working hours, and employment participation rates.

This will reveal that richer countries generally have adopted a wider set of labor market

measures and that this reduced the impact of the pandemic on growth rate performance in

these countries. A study of whether different sets of labor market measures were effective at

reducing the negative impacts of the pandemic showed that pillars 1 (measures to stimulate the

economy and jobs), 2 (measures to support enterprises, employment, and incomes), and 3 (mea-

sures to protect workers in the workplace) were more relevant for mitigating the impact of the

pandemic on growth rate performance. Meanwhile, pillar 4 (social dialogue) is significantly

associated with mitigating the impacts of the pandemic on employment participation rates. As

expected, pillar 2 (measures to support enterprises, employment, and incomes) was significantly

associated with mitigating the impacts of the pandemic on working hours; fewer working hours

were lost during 2020. The contribution of our paper to the literature is twofold. First, we

believe that it provides a framework to quantify and evaluate the labor market measures taken

during the pandemic. Second, it also allows us to understand the association of these

implemented measures with several outcome variables in the labor market.

The rest of the paper is structured as follows. Section 2reviews the economic impacts of the

pandemic and the adopted policy responses as a response to it. Section 3outlines the data used

and the empirical methodology adopted. Section 4presents the empirical results on the degree

to which these labor market interventions have been adopted, and Section 5presents an evalua-

tion of which labor market interventions were effective at reducing the negative impacts of the

pandemic on growth, working hours, and employment. It also includes the policy relevance of

our results. Section 6provides the conclusions and discusses the implications for future shocks.

2|ECONOMIC IMPACTS OF THE COVID-19 PANDEMIC

AND POLICY RESPONSES

Globally, countries have engaged in labor market policy interventions to try to limit the impacts

of the pandemic on their economies. These economic interventions targeting households, firms,

ELGIN ET AL.353