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BIA-Brukerstyrt innovasjonsarena

The corona crisis and its economic consequences

Alternative title: Økonomiske konsekvenser av koranakrisen

Awarded: NOK 3.9 mill.

The project's ambition was to document the magnitude, dynamics and socio-economic characteristics of the corona crisis and its recovery, the impact of the various government crisis measures, along with analyses of the economic recovery across individuals, families, businesses, and regions. It is usually not possible to conduct close to real time analysis on the data that researchers until now had available, as the data covering the entire population are supplied by Statistics Norway with a time lag of up to two or three years. The project shows that extraordinary effort from NAV and Statistics Norway made it possible to supply research communities with labour market data in almost real time, and this innovation has in itself been an important result of the project that in the future will facilitate fact-based policy-making. The research has been descriptive, but partly designed to identify mechanisms including effects of policies. The project builds on cooperation between researchers and stakeholders (LO, NHO and NAV). The corona crisis affected workers differently. We provide new evidence on the heterogeneous employment responses to the economic crisis induced by COVID-19. Utilizing monthly administrative pay records for all Norwegian employees, we that total pay (hours worked) dropped by 8% the first two months after the initial lockdown, followed by a quick recovery. By October 2021, we estimate a reduction in total hours worked of about 2%. For prime-aged employees, we find monthly pay reductions in line with those for the whole economy. For senior wage earners and unemployed, the negative long-term employment effects were even larger. We identify significant social gradients, as persons with low past earnings, immigrants, and youth with a disadvantaged family background experienced more adverse consequences of the crisis. The work loss during the pandemic was particularly large among short-term migrants. By October 2021, there were still far fewer non-resident foreigners in the Norwegian labour market and this decrease accounted for almost 41% of the total reduction in hours for the entire economy During the early phase of the pandemic, we studied how vulnerable companies are to a loss of revenue, and to what extent the implemented policy instruments have worked. The revenue shock was strong and threatened t many companies in the short run. At the same time, the findings show that crisis policy is effective in limiting the consequences. Overall, the Norwegian and US crisis measures have approximately the same effect, where the measures more than halve the negative effect the crisis has had on profit, liquidity and solvency. The major impact on the labour market led to layoffs and job losses with potentially important health consequences. In collaboration with researchers at the National Institute of Public Health, we have analysed the associations between exposure to job losses in 2020 and the use of health services across occupational groups. Extensive layoffs and increase in unemployment during the pandemic go hand in hand with a marked increase in the use of the primary and specialist health services for mental diagnoses. An econometric analysis reveals a causal relationship where higher exposure to work loss increased the use of health care services for mental diagnoses. The data show that relatively few laid-off and unemployed people used the opportunity to combine unemployment benefit with education that provides formal competence. Further, a study of the graduating cohorts from upper secondary education and bachelor's studies in the spring of 2020 showed that far more continued in education, and fewer left school for work, in the same autumn compared to previous graduate cohorts. The differential transition patterns of the Covid-cohorts can mainly be explained by poorer job opportunities measured by local unemployment. When we extend the outcomes a year to the autumn of 2021, we find that the increase in education and fall in the share of jobs in the pandemic cohort was temporary. There are no signs of lasting traces in the educational careers of the graduating cohorts during the pandemic. The sharp increase in unemployment in March-April 2020 gave NAV major administrative challenges, including a waiting time of 2-3 months in the processing of unemployment benefit (UB) applications. To prevent the unemployed and their families from liquidity, a scheme with advances in UB upon application was introduced. When microdata from NAV, we find that half of those who became unemployed or temporarily laid off during March-May applied for these advance payments. There was no difference between women and men, a slight tendency towards smaller advances the higher the level of education. The scheme appears to be relatively successful since liquidity constrained families were much more likely to apply and receive in-advance benefits than household with good access to liquidity to cover deferred income.

Prosjektet har gitt betydelig innsikt i konsekvenser av pandemien og særlig for arbeidsmarkedet. Som ved andre kriser er konsekvensene ulikt fordelt på grupper i samfunnet og de sosiale gradientene i pandemien følger på mange måter kjente mønstre. Arbeidsledigheten og permitteringene hadde også effekter på psykisk helse, bidro til økt deltakelse i utdanning og samtidig falt tilbudet av utenlandsk arbeidskraft i Norge. Ettersom prosjektet bidro med fersk sanntidsinformasjon om utviklingen i arbeidsmarkedet, særlig i den første fasen av pandemien, har prosjektet vært nyttig for politikkutvikling og arbeidslivets parter under pandemien. På en rekke områder har kunnskapen overføringsverdi for håndtering av framtidige kriser. Prosjektet var innovativt i design da vi var de første som klarte sette opp en nær sanntids utlevering av data fra NAV og SSB som muliggjorde løpende analyser av arbeidsmarkedsutviklingen gjennom de første fasene av pandemien. Dermed har prosjektet har gitt innsikt i bruk av nye administrative datakilder for forskning og bidratt sterkt til økt fokus på potensialet i sanntidsdata levert av administrative kilder i Norge til å overvåke og forstå økonomisk utvikling. Dette har også banet veien for nye typer og raskere samarbeid på tvers av etater og institusjoner for å generere helt nødvendige faktabaserte innspill til politikkutviklingen også i fremtiden. Rask informasjon er svært viktig for iverksetting av effektive politiske tiltak med henblikk på å dempe konsekvenser av kriser under utvikling. Prosjektet har bidratt til økt interaksjon mellom deltakende forskningsmiljøer, og mellom forskning og forvaltning via drøftinger av datafaglige spørsmål og tolkninger av resultater. Samfunnsvitenskapelig publisering internasjonalt tar (altfor) lang tid og ofte skjer publisering etter prosjektslutt. Prosjektet har generert 4 publiserte vitenskapelige artikler/kapitler og 3 artikkelutkast (arbeidsnotater) er under og på vei til vurdering i tidsskrifter i løpet av året. Prosjektdeltakerne har deltatt aktivt i samfunnsdebatten under pandemien, både gjennom (minst) 100 kronikker, mediaoppslag i nasjonale medier og presentasjoner der grunnlaget for mange av innspillene har vært basert på kunnskap fra dette prosjektet. Vi har også løpende presentert resultater for departementer og allmennhet, gjennom direkte og inviterte foredrag, og en innovativ serie av zoom-foredrag av nye resultater, uten å vente på at artikler skal bli ferdige, der både slides og foredrag har blitt lagt ut på egen webside. Prosjektet har vært relativt kortvarig, men lagt et viktig grunnlag for en pågående forskning om kriser gjennom etablering av både data og institusjonell kunnskap. Frischsenteret er deltaker i tre andre prosjekter finansiert av Forskningsrådet der innsikt fra og investeringer gjort i dette prosjektet er svært nyttige for dette videre forskning på effekter av økonomiske kriser og utforming av politikk som både skal forebygge og håndtere konsekvenser.

Based on close to real-time register data, we will document the magnitude, dynamics and socio-economic characteristics of the corona crisis and its recovery, the impact of the various government crisis measures, along with analyses of the economic recovery across individuals, families, businesses, sectors and regions. The research activities will be partly descriptive (what happened during the crisis and its recovery?), partly designed to identify mechanisms (why did it happen?), and partly designed to evaluate effects of policies (what should we do about it?). Central topics include • An analysis of individual job losses, subsequent unemployment durations and their ultimate outcomes • An examination of the distributional consequences of the crisis and the extent to which social insurance programs contributed to a fair burden sharing • A closer look at spillovers across industries and the economy’s ability to reallocate workers and entrepreneurs from declining to growing industries • An examination of the matching efficiency between unemployed workers and vacancies, with the aim of identifying mismatches related to skills and geography • A study of how migration patterns responded to the crisis, and how this affected job opportunities for native workers and the availability of labor demanded by Norwegian firms. • An examination of how the crisis affected entrepreneurship and an evaluation of the extent to which Norwegian labor market policies are designed to encourage the creation of new jobs. • An analysis of how the crisis affected educational choices during the Spring 2020 • An effect analysis of Norwegian labor market programs during an era of mass layoffs • An assessment of the major economic support packages implemented by the Norwegian government, including the changes in the unemployment insurance program and the introduction of cash support to cover firms’ unavoidable fixed costs • An examination of the role expectations for firms’ investment behavior

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BIA-Brukerstyrt innovasjonsarena