The impact of city epidemics on rural labor market: The Korean Middle East Respiratory Syndrome case

•This study compared the damage aspects of a labor market which is directly hit by an epidemic with those which is not directly hit.•The rural labor market was influenced by the spillover effects due to fear of infection.•This empirical analysis can be used to customize policy to support regions that can be negatively impacted by spillovers due to epidemic. This study compared the changes in employment in urban areas in Korea, where a large number of people were quarantined by the Middle East Respiratory Syndrome epidemic, to those in rural areas, where only a small number of people were quarantined using the difference-in-difference approach. The results indicate that the urban labor market experienced a direct effect in terms of a reduction in employment of the group vulnerable to the epidemic while the rural labor market experienced an indirect effect on its economy through a reduction in employment resulting from a decline in consumption and leisure activities. If one looks into the employment in the accommodation and leisure industry, which sustained the most severe blow, dropped to its lowest level right after the Middle East Respiratory Syndrome outbreak. The rural leisure and accommodation industries are highly likely to be dependent on consumption and spending from urban areas. The results suggest that the rural labor market was influenced by the spillover/external effects caused by behavioral changes among people in urban areas due to fear of infection. Thus, this empirical analysis can be used to customize policy to support regions that can be negatively impacted by spillovers due to epidemic in order to respond against economic stresses.