- Jongkwan Lee: Department of Economics, Ewha Womans University, 52 Ewhayeodae-gil, Seodaemun-gu, Seoul 03760, South Korea.
- Hee-Seung Yang: School of Economics, Yonsei University, 50 Yonsei-ro, Seodaemun-gu, Seoul 03722, South Korea.
Using two complementary approaches, this study examines the deterioration of the Korean labor market during the first 10 months of the global COVID-19 pandemic. Applying the synthetic control method, we first find that the COVID-19 outbreak has eliminated 1.1 million jobs (4.2% of nonfarm employment) nationwide in April 2020. However, a difference-in-differences approach shows that local variation in COVID-19 intensity, which captures the "regional" effect of the pandemic, explains only 9% of the national shock. The portion of the regional effect remains low until December. This is mainly because the nationwide fear and policies such as social distancing measures also have a "common" effect on local economies. Our findings suggest that the COVID-19 shock may last long in the labor market due to this common effect unless the risk of infection is completely eliminated.