• Last updated: Fri, Dec 2, 2022Status: Ongoing
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• Anders Akerman, Karolina Ekholm, Torsten Persson, and Oskar N. Skans

Sweden's COVID-19 Recession: How Foreign and Domestic Infections Struck against Firms and Workers

The COVID-19 pandemic had massive contractionary effects on most economies across the globe. However, the economic effects varied tremendously both within and across countries. We use highly granular Swedish micro-data to document the economic effects of the COVID-19 pandemic on Swedish private-sector firms and their workers.

The study shows that trading firms suffered larger output losses if they exported to, or imported from, countries with high COVID-rates and/or disruptive COVID restrictions. Service sector firms that operated in locations with many COVID cases were forced to reduce their output due to falling local consumption. This is striking since Sweden had very limited regional variation in restrictions and recommendations.

We further show that it mattered for workers’ earnings if their firms where exposed to such trade-disruptions or reductions in local consumption. Workers at the bottom of each social gradient—defined by education, earnings or ethnicity—took a twofold hit: their employers faced the largest output drops, and they experienced the largest transmissions from firm output to earnings.