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Jorge Alvarez and Carlo Pizzinelli
This paper documents the impact of the COVID-19 pandemic and associated lockdowns on the Colombian labor market using household micro-data. About a quarter of employment was temporarily disrupted at the height of the first pandemic-induced lockdown in 2020. Women, the young, and the less educated were the most affected groups. Since then, a remarkable recovery, led by a rebound in informal employment, has taken place. By adjusting both employment levels and hours faster, the informal sector acted as an important margin of adjustment, particularly in those industries most affected by the first lockdown. The informal sector also appears to have played a role in decreasing the sensitivity of aggregate employment to more recent lockdowns in 2021, as the economy has learned to cope with pandemic restrictions, although the possibility of higher informality rates becoming embedded remains an substantial downside risk for long-term productivity.
Jorge Alvarez and Carlo Pizzinelli

: jalvarez@imf.org ; cpizzinelli@imf.org . Contents I. Introduction II. Data Description III. The Covid-19 Shock From A Regional Perspective A. The Initial Impact B. The Uneven Recovery IV. Distributional Impact And Policies A. Employment and Income Losses B. Offsetting Policies V. Informality As A Margin Of Adjustment A. Informality Adjustment Margins B. Interaction with Sectoral Composition VI. The (Diminishing) Effects Of Lockdowns A. The Diminishing Effect of Lockdowns on Mobility B. The Diminishing Effect of Lockdowns

Jorge Alvarez and Carlo Pizzinelli

populations at risk of moving into poverty. However, because of budgetary limitations and technical challenges in directly reaching all those affected by the pandemic— particularly in the informal sector—the transfer expansion helped but did not fully offset income losses, as a majority of those who reported losing jobs due to COVID-19 were not enrolled in any government transfer program. V. Informality as a Margin of Adjustment A. Informality Adjustment Margins Partly due to the lack of regulation and greater flexibility in extensive (hiring/firing) and