COVID-19 and employment relief programs: A tale of spatially blind policies for a spatially driven pandemic

Abstract

We use the case of Chile to analyze the effectiveness of a spatially blind employment relief program (hereafter referred to as the LPE program) established by the Chilean government and implemented during the COVID-19 pandemic. Chile is an interesting case because on the one hand its nonpharmaceutical interventions were spatially driven by health indicators based on small geographical areas; hence, producing sizeable regional and temporal variation of the local conditions induced by the COVID-19 pandemic. On the other hand, the LPE program was designed and implemented nationally without distinction of local labor market or pandemic conditions, and each firm could decide whether to enroll in the program. By exploiting the spatial-temporal variation of exogenously imposed lockdowns and using a difference-in-differences panel data framework, we find that the LPE program was only effective for a group of regions in the country but, more importantly, that the LPE program was less effective during lockdowns. Moreover, the requirements of the LPE program were vague and did not target specific populations or entities. Consequently, our results suggest that women, informal and small firm workers, and most economic sectors throughout the country were less able to take advantage of the benefits of this program.