The most commonly used test for the presence of SARS-CoV-2 is a PCR test that is able to detect very low viral loads and inform on treatment decisions. Medical research has confirmed that many individuals might be infected with SARS-CoV-2 but not infectious. Knowing whether an individual is infectious is the critical piece of information for a decision to isolate an individual or not. This paper examines the value of different tests from an information-theoretic approach and shows that applying treatment-based approval standards for tests for infection will lower the value of those tests and likely causes decisions based on them to have too many false positives (i.e., individuals isolated who are not infectious). The conclusion is that test scoring be tailored to the decision being made.
Gans, J (2020), ‘Test Sensitivity for Infection versus Infectiousness for SARS-CoV-2‘, COVID Economics 47, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-47#392514_392923_390611
This paper examines the implications of lockdown policies for asset prices using a susceptible-infected-recovered model with microeconomic foundations of individual economic behaviours. In our model, lockdown policies reduce (i) labour income by decreasing working hours and (ii) precautionary savings by decreasing susceptible agents' probability of getting infected in the future. We qualitatively show that strengthening lockdown measures negatively impacts asset prices at the time of implementation. Our empirical analysis using data from advanced countries supports this finding. Depending on parameter values, our numerical analysis displays a V-shaped recovery of asset prices and an L-shaped recession of consumption. The rapid recovery of asset prices occurs only if the lockdown policies are insufficiently stringent to reduce the number of new periodic cases. This finding implies the possibility that lenient lockdowns have contributed to rapid stock market recovery at the beginning of the COVID-19 pandemic.
Saito, Y and J Sakamoto (2020), ‘Asset Pricing during Pandemic Lockdown‘, COVID Economics 47, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-47#392514_392923_390612
We study the response of daily household spending to the unexpected component of the COVID-19 pandemic, which we label as pandemic shock. Based on daily forecasts of the number of fatalities, we construct the surprise component as the difference between the actual and the expected number of deaths. We allow for state-dependent effects of the shock depending on the position on the curve of infections. Spending falls after the shock and is particularly sensitive to the shock when the number of new infections is strongly increasing. If the number of infections grows moderately, the drop in spending is smaller. We also estimate the effect of the shock across income quartiles. In each state, low-income households exhibit a significantly larger drop in consumption than high-income households. Thus, consumption inequality increase after a pandemic shock. Our results hold for the US economy and the key US states. The findings remain unchanged if we choose alternative state-variables to separate regimes.
Finck, D and P Tillmann (2020), ‘Pandemic Shocks and Household Spending‘, COVID Economics 47, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-47#392514_392923_390613
Using the universe of Austrian unemployment insurance records until May 2020, we document that the composition of UI claimants during the Covid-19 outbreak is substantially different compared to past times. Using a machine-learning algorithm from Gulyas and Pytka (2020), we identify individual earnings losses conditional on worker and job characteristics. Covid-19-related job terminations are associated with lower losses in earnings and wages compared to the Great Recession, but similar employment losses. We further derive an accurate but simple policy rule targeting individuals vulnerable to long-term wage losses.
Gulyas, A and K Pytka (2020), ‘The Consequences of the Covid-19 Job Losses: Who Will Suffer Most and by How Much?‘, COVID Economics 47, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-47#392514_392923_390614
I study the demand for health insurance during the COVID-19 pandemic using Special Enrollment Period (SEP) individual-level enrollment data from the Washington State Affordable Care Act Marketplace. I document that most individuals enrolling in plans during the pandemic are those who lost minimum essential coverage, followed by uninsured individuals making use of Washingtonâ€™s limited-time SEP for uninsured individuals. I estimate a demand model and find that low-income individuals and young individuals are more premium sensitive. I find that 20.4 percent of the individuals in my analysis sample did not pay their initial premium. Individuals losing minimum essential coverage are less likely to pay their initial premium than individuals using the SEP for other qualifying events. Lower income individuals are less likely to pay the initial premium than higher income individuals. My results suggest three reasons for considering more generous premium subsidies during the remainder of the pandemic: (1) individuals losing minimum essential coverage are already using the exchange to replace lost coverage, (2) consumers are premium sensitive, and (3) there are meaningful differences across demographic groups in the probability of paying the first premium, which is necessary for coverage to take effect.
Ruiz Sanchez, G (2020), ‘Demand for Health Insurance in the Time of COVID-19: Evidence from the Special Enrollment Period in the Washington State ACA Mar‘, COVID Economics 47, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-47#392514_392923_390615
This paper develops a quantitative life cycle model in which economic decisions impact the spread of the COVID-19 and, conversely, the virus affects economic decisions. The calibrated model is used to measure the welfare costs of the pandemic across the age, income, and wealth distribution and to study the effectiveness of various mitigation policies. In the absence of mitigation, young workers engage in too much economic activity relative to the social optimum, leading to higher rates of infection and death in the aggregate. The paper considers a subsidy-and-tax policy that imposes a tax on consumption and subsidizes reduced work compared to a lockdown policy that caps work hours. Both policies are welfare improving and lead to less infections and deaths. Notably, almost all agents favor the subsidy-and-tax policy, suggesting that there need not be a tradeoff between saving lives and economic welfare.
Hur, S (2020), ‘The Distributional Effects of COVID-19 and Mitigation Policies‘, COVID Economics 47, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-47#392514_392923_390616
Mass attendance events are a mainstay of economic and social activity. Such events have public health consequences, facilitating the spreading of disease, with attendant economic consequences. There is uncertainty over the impact such events can have on the spread of disease. We investigate the impact of regular mass outdoor meetings on the spread of a virus by considering football matches in England in February and March 2020 and the spread of Covid-19 into April 2020. There were 340 league and cup football matches with a combined attendance of 1.625m people in March, taking place over 188 of 313 local areas. We look at the occurrence and attendance at matches, and how full the stadia were, and how these variables are related to the spread of Covid-19 in April. We evaluate Covid-19 cases, deaths and excess deaths, all as rates of 100,000 people in an area. We find evidence that mass outdoor events were consistent with more cases and deaths, even after controlling for measurable characteristics of local areas. We find that a football match is consistent with around six additional Covid-19 cases per 100,000 people, two additional Covid-19 deaths per 100,000 people, and three additional excess deaths per 100,000 people. This effect is slightly stronger for the areas of away teams in March, and slightly weaker for matches in February. These results suggest caution in returning to unrestricted spectator attendance at matches. We caveat our analysis though by noting that stadium access and egress routes can be adapted such that some of the opportunities for the spread of an airborne virus could be mitigated. We recommend that the relevant authorities conduct pilot events before determining to what extent fans can return to mass outdoor events.
Olczak, M, J Reade and M Yeo (2020), ‘Mass Outdoor Events and the Spread of an Airborne Virus: English Football and Covid-19‘, COVID Economics 47, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-47#392514_392923_390617