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COVID-19’s Impact on the Labor Market Shaped by Automation: Evidence from Chile

This paper provides evidence of the impact of COVID-19 on employment in Chile. During the last two quarters, the pandemic destroyed two million jobs, almost one third of the labor force. To formulate economic policies we must understand why some sectors, occupations, and demographic groups are more affected than others. At the same time, Covid-19 is catalyzing the automation process in emerging markets. We find that sectors with a large fraction of occupations at risk of automation present the most significant contraction in employment. Employment in sectors with a large share of occupations at risk of automation fell between 12 and 8 percentage points more relative to other industries during the second quarter of 2020. This impact is larger in female workers. We also find that factors directly related to the epidemic are significant. Employees in occupations working in proximity to others are more affected by the pandemic, while those in occupations able to work remotely are less affected. We should expect that employment in these occupations should recover faster post-pandemic.