The short-term effect of a COVID-19 infection on employment probabilities of labour-market entrants in the Netherlands

This research estimates the effect of a COVID-19 infection on the employment probabilities of two cohorts of labour-market entrants in the Netherlands. To identify the causal effect, we exploit variation in registered (positive) COVID-19 (PCR) test results among graduates over time and estimate a heterogeneity-robust difference-in-difference model. The empirical results suggest that a COVID-19 infection decreases the employment probabilities of positively tested labour-market entrants (ATT) by 0.5-1.1 percentage points over a three-month period within the first fifteen months after graduation. The effect size and duration are limited and predominantly driven by graduates from secondary vocational education and those who are just entering the labour market. The estimated coefficients for graduates from higher education and those who have already been employed for some months are economically small. Due to differences in group size and timing of the event, a direct comparison to the effect of lockdown measures is not possible. However, the effect size (ATT) seems to be at most ten percent of the average effect (ATE) of COVID-19 related lockdowns.