Estimating the causal employment effects of South Africa’s national lockdown. South Africa is one of the most unequal countries in the world and has been amongst those most adversely affected by the COVID-19 pandemic in Africa. In response to the pandemic, the government quickly implemented a relatively stringent national lockdown, making no allowance for any non-essential activities outside the home. The lockdown was always expected to result in a substantial economic cost. Existing research has highlighted how vulnerable workers have been disproportionately affected, exacerbating the country’s already high levels of inequality and unemployment. However, all of these studies are largely descriptive in nature.
In this paper, we provide causal evidence of the impact of the country’s lockdown policy on labour market outcomes at the extensive margin. To do so, we adopt a matched difference-in-differences approach to exploit quasi-experimental variation in legislated industry level permission to work and the coincidental timing of the lockdown and data collection dates of nationally representative labour force data. We find that the national lockdown significantly decreased the probability of employment for those not permitted to work by 8 percentage points relative to the control group – a finding that holds across several robustness tests. In particular, we show that the lockdown jeopardized the livelihoods of those in the informal sector, with an estimated effect nearly 3 times larger than the overall effect.
The vulnerability of this group to the economic consequences of the pandemic is of concern, given that their informality presents a challenge for government to provide targeted relief. To prevent further widening labour market inequalities, our analysis emphasises the importance of effective policy the support the livelihoods of those in the informal economy.
Tim is a development micro-economist and researcher at the Development Policy Research Unit (DPRU) – a university-recognized research unit actively engaged in policy-relevant socio-economic research for nearly 30 years – and is also a PhD candidate in the School of Economics at the University of Cape Town (UCT). His PhD dissertation focuses on the labour market and policy effects of the COVID-19 pandemic in South Africa, particularly on the role of social protection in aiding labour market recovery. His research interests include poverty and inequality analysis, labour economics, social protection, the economics of education, and health economics.
by 