How did COVID lockdowns affect firms and workers? Evidence from Jordan and Morocco

Document Type

Article

Source of Publication

Development Policy Review

Publication Date

6-23-2023

Abstract

The COVID‐19 pandemic can harm business and employment in two ways: ill‐health can reduce consumer demand for goods and services; and lockdowns to control disease can prevent businesses operating. This paper is concerned with this latter effect. This paper assesses (a) losses of both full‐time and part‐time jobs and (b) wage cuts in Jordan and Morocco arising from businesses having to close down under lockdowns. We compare firms that closed down under lockdown to those that did not in the two countries. We used propensity score matching to balance the two sets of firms. We drew on data from two rounds of the COVID‐19 World Bank Enterprise Survey, carried out June‐ August 2020 for both countries; and November‐December 2020 for Jordan and January‐February 2021 for Morocco. The surveys included 601 firms in Jordan and 1,096 in Morocco. We use results from the first round to estimate short term effects, and those fromthe second round to estimate medium term effects. The survey differentiated firms by sector — manufacturing, retailing, and other services — by firm size, by foreign ownership, and by exporting. First we checked the likelihood that firms closed: larger firms and non‐exporting firms were significantly less likely than smaller and exporting firms to close down. When firms closed, they shed jobs, but with marked differences across sectors. Manufacturing firms laid workers off in the short term, an effect that did not increase in the medium term. By the medium term, however, manufacturing firms also reduced wages. Retail firms shed fewer jobs in the short term, but cut more jobs in the medium term —mainly of part‐time workers. They also cut wages in the medium term. For other services, job losses were seen for part‐time workers in both short and medium terms. Policymakers should consider: promoting digitisation of the economy; programmes to reform and repurpose businesses; and targeted unemployment benefits to protect workers from loss of jobs and earnings from lockdowns.

ISSN

0950-7679

Publisher

Wiley

Disciplines

Business

Keywords

COVID -19. lockdowns, employment, Jordan, Morocco, Propensity Score Matching

Indexed in Scopus

no

Open Access

no

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