Drastic public health measures such as social distancing or lockdowns can reduce the loss of human life by keeping the number of infected individuals from exceeding the capacity of the health care system but are often criticized because of the social and economic costs they entail. We question this view by combining an epidemiological model, calibrated to capture the spread of the COVID-19 virus, with a multisector model, designed to capture key characteristics of the U.S. Input Output Tables. Our two-sector model features a core sector that produces intermediate inputs not easily replaced by inputs from the other sector, subject to minimum-scale requirements. We show that, by affecting workers in this core sector, the high peak of an infection not mitigated by social distancing may cause very large upfront economic costs in terms of output, consumption and investment. Social distancing measures can reduce these costs, especially if skewed towards non-core industries and occupations with tasks that can be performed from home, helping to smooth the surge in infections among workers in the core sector.
Bodenstein, M, G Corsetti and L Guerrieri (2020), ‘Social Distancing and Supply Disruptions in a Pandemic‘, COVID Economics 19, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-19#392514_392895_391034
Since the first outbreak was reported in Wuhan, China in late December 2019, the 2019 coronavirus disease (COVID-19) has spread to over 200 countries/territories globally. In response, many countries have implemented several containment measures to halt the spread of the virus and limit the number of fatalities. It remains unclear the extent to which these unprecedented measures have been successful. The paper examines this question using daily data on the number of COVID-19 cases and deaths as well as on real-time containment measures implemented by countries around the world. Results suggest that containment measures have been, on average, very effective in flattening the â€œpandemic curveâ€ and reducing the number of fatalities. These effects have been stronger in countries where containment measures have been implemented faster and have resulted in less mobilityâ€”de facto, more social distancingâ€”and in those with lower temperatures, lower population density, a larger share of an elderly population and stronger health systems. Among different types of containment measures, stay-at-home orders seems to have been more effective in reducing the number of deaths. However, these adjustments benefitted mostly highly educated workers and white collars. Overall, low-income individuals faced worse labor market outcomes and suffered higher psychological costs.
Deb, P, D Furceri, J Ostry and N Tawk (2020), ‘The effect of containment measures on the COVID-19 pandemic‘, COVID Economics 19, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-19#392514_392895_391035
As COVID-19 has spread across the globe, several observers noticed that countries still administering an old vaccine against tuberculosisâ€“the BCG vaccineâ€“have had fewer COVID-19 Â cases and deaths per capita in the early stages of the outbreak. This paper uses a geographic regression discontinuity analysis to study whether and how COVID-19 Â prevalence changes discontinuously at the old border between West Germany and East Germany. The border used to separate two countries with very different vaccination policies during the Cold War era. We provide formal evidence that there is indeed a sizable discontinuity in COVID-19 cases at the border. However, we also find that the difference in novel coronavirus prevalence is uniform across age groups and show that this discontinuity disappears when commuter flows and demographics are accounted for. These findings are not in line with the BCG hypothesis. We then offer an alternative explanation for the East-West divide. We simulate a canonical SIR model of the epidemic in each German county, allowing infections to spread along commuting patterns. We find that in the simulated data, the number of cases also discontinuously declines as one crosses from west to east over the former border.
Bluhm, R and M Pinkovskiy (2020), ‘The spread of COVID-19 and the BCG vaccine: A natural experiment in reunified Germany‘, COVID Economics 19, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-19#392514_392895_390457
We develop an econometric model of consumer panic (or panic buying) during the COVID-19 pandemic. Using Google search data on relevant keywords, we construct a daily index of consumer panic for 54 countries from January to late April 2020. We also assemble data on government policy announcements and daily COVID-19 cases for all countries. Our panic index reveals widespread consumer panic in most countries, primarily during March, but with significant variation in the timing and severity of panic between countries. Our model implies that both domestic and world virus transmission contribute significantly to consumer panic. But government policy is also important: Internal movement restrictions - whether announced by domestic or foreign governments - generate substantial short run panic that largely vanishes in a week to ten days. Internal movement restrictions announced early in the pandemic generated more panic than those announced later. In contrast, travel restrictions and stimulus announcements had little impact on consumer panic.
Keane, M and T Neal (2020), ‘Consumer Panic in the COVID-19 Pandemic‘, COVID Economics 19, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-19#392514_392895_390458
We use helpline calls to measure psychological and social suffering in the population at a daily frequency. Our data are from Switzerlandâ€™s most popular free anonymous helpline, focusing on the Covid-19 crisis period. We compare calls (a) between the pandemic period of 2020 and the corresponding period of 2019 and (b) along the timeline of the lockdown. We find the total volume of calls to have grown in line with the long-run trend. To the extent that calls did increase, this was mainly explained by worries linked directly to the pandemic: calls by persons over 65 and calls about fear of infection. Encouragingly, calls about violence were down on the previous year. Calls about addiction and suicidality increased during the initial phase of the lockdown, plateaued, and returned to their 2019 levels once gradual opening started. Calls about relationship problems decreased in the early phase of the lockdown, and gradually increased, again reaching 2019 levels once opening up started. Â Overall, these results suggest that psychological and social strain is of second-order importance relative to the medical anxieties generated by the pandemic.
Brülhart, M and R Lalive (2020), ‘Daily Suffering: Helpline Calls during the Covid-19 Crisis‘, COVID Economics 19, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-19#392514_392895_390459
The economic effects of a pandemic crucially depend on the extent to which countries are connected in global production networks. In this paper we incorporate production barriers induced by COVID-19 shock into a Ricardian model with sectoral linkages, Â trade in intermediate goods and sectoral heterogeneity in production. We use the model to quantify the welfare effect of the disruption in production that started in China and quickly spread across the world. We find that the COVID-19 shock has a considerable impact on most economies in the world, especially when a share of the labor force is quarantined. Moreover, we show that global production linkages have a clear role in magnifying the effect of the production shock. Finally, we show that the economic effects of the COVID-19 shock are heterogeneous across sectors, regions and countries, depending on the geographic distribution of industries in each region and country and their degree of integration in the global production network
Sforza, A and M Steininger (2020), ‘Globalization in the time of COVID-19‘, COVID Economics 19, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-19#392514_392895_390460
The spread of COVID-19 and implementation of â€œsocial distancingâ€ policies around the world have raised the question of how many jobs can be done at home. This paper uses skills surveys from 53 countries at varying levels of economic development to estimate jobsâ€™ amenability to working from home. The paper considers jobsâ€™ characteristics and uses internet access at home as an important determinant of working from home. The findings indicate that the amenability of jobs to working from home increases with the level of economic development of the country. This is driven by jobs in poor countries being more intensive in physical/manual tasks, using less information and communications technology, and having poorer internet connectivity at home. Women, college graduates, and salaried and formal workers have jobs that are more amenable to working from home than the average worker. The opposite holds for workers in hotels and restaurants, construction, agriculture, and commerce. The paper finds that the crisis may exacerbate inequities between and within countries. It also finds that occupations explain less than half of the variability in the working-from-home indexes within countries, which highlights the importance of using individual-level data to assess jobsâ€™ amenability to working from home.
Hatayama, M, M Viollaz and H Winkler (2020), ‘Job's amenability to working from home: Evidence from skills surveys for 53 countries‘, COVID Economics 19, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-19#392514_392895_390461
Coronavirus has been portrayed as the â€œgreat equalizerâ€. None seems immune to the virus and to the economic consequences of the lockdown measures imposed to contain its diffusion. We exploit novel data from two real time surveys to study the early impact on the labor market of the lockdown in Italy â€“ one of the two countries, with China, hit hard and early. COVID was not a â€œgreat economic equalizer.â€ Quite on the contrary. Low-educated workers, blue collars and low-income service workers were more likely to have stopped working both three-week and six-week after the lockdown. Low-educated workers were less likely to work from home. Blue collars worked more from their regular workplace, but not from home. Low-income service workers were instead less likely to work from the regular workplace. For both blue collars and low-income service workers, the monthly labor income dropped already in March. Not surprisingly, they were less in agreement with the public policy measures that required the closing of (non-essential) business and activities. Some positive adjustments took place between the third and the sixth week from the lockdown: the share of idle workers dropped, as the proportion of individuals working at home and from their regular workplace increased. However, these adjustments benefitted mostly highly educated workers and white collars. Overall, low-income individuals faced worse labor market outcomes and suffered higher psychological costs.
Galasso, V (2020), ‘COVID: Not a Great Equalizer‘, COVID Economics 19, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-19#392514_392895_390462