Labour Supply responses in the face of a pandemic: Can varying incidences of COVID-19 explain differences in labour market participation across the OECD?

Abstract

This thesis examines the relationship between virus intensity, vaccination rates and government policy responses on labour force participation throughout the pandemic across OECD countries. Higher levels of virus intensity have likely created a disutility of labour supply at the individual level due to increased health risks of workplace transmission. Upon aggregation, this has likely contributed to broad reductions in labour supply across 38 OECD countries. This paper uses a panel Fixed Effect (FE) econometric design to investigate the labour supply response to per-capita vaccination rates, virus cases and deaths. The results vary by the age of workers and by country. Though there is evidence of a relationship at the aggregate level, there is no clear link between age dynamics and responses to the pandemic across labour markets. Additionally, panel stratification partially supports social and political interpretations of model results. The results of this paper suggest the positive labour supply response to vaccination rates is more significant in magnitude than the negative response to virus intensity.