Celebration of Scholarship, Creativity & Achievement

Mary Margaret Baldy

COVID-19: The Impact of a Nation’s Political Economic Structure on its Labor Market Spending Policies

Project Description

The onslaught of COVID-19 in March 2020 claimed the lives of millions and caused a global economic downturn marked by vast unemployment. Previous research has focused on how fiscal policy is utilized by advanced developed nations and their objectives with respect to fiscal policy. This paper aims to examine how a given nation’s labor market spending policies are impacted by its political economic structure. In order to delineate between and analyze the approaches of different political economic structures, this paper utilizes Nordic, Liberal, and Asian States constructs. In order to investigate the impact of political economic structure on labor market spending, explanatory variables, including GDP growth rate, the unemployment rate, top marginal individual income tax rates, the GINI index, a democracy index, and COVID-19 confirmed cases, will be utilized in a regression analysis to examine the effects on the unemployment benefits replacement rate. A nation’s top marginal individual income tax rate is found to have a significant positive effect on a nation’s unemployment benefits replacement rate. And of the three constructs (Nordic, Liberal, and Asian states), Liberal is the only significant result, and had a strong negative correlation with a nation’s unemployment benefits replacement rate. Moving forward, this has broad implications for Liberal states. Particularly in the U.S., the COVID-19 pandemic has exposed disparities in the labor market for low-income workers. This may prove to be a turning point as policy makers accede to demands for more support to workers in the form of enhanced unemployment benefits.

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Applied Economics and Politics

Faculty Advisor

Ann Karreth and Weinan Yan


Ellicott City, MD