We consider individuals who are privately informed about the probability of being infected by a potentially dangerous disease. Depending on its private health signal, an individual may assign a positive or negative value to getting tested for the disease. Individuals dislike social distancing. The government has scarce testing capacities and scarce resources for enforcing social-distance keeping. We solve the government's problem of setting up an optimal testing-and-social-distancing schedule, taking into account that individuals may lie about their private health signal. Rather than modelling the infection dynamics, we take a snapshot view, that is, we ask what should be done at a particular point in time to curb the current spread of the disease while taking the current well-being of the individuals into account as well. If testing capacities are sufficiently scarce, then it can be optimal to test only a randomly selected fraction of those who want to be tested, and require maximal social distancing precisely for those individuals who wanted a test and ended up not belonging to the tested fraction.
Tröger, T (2020), ‘Optimal testing and social distancing of individuals with private health signals‘, COVID Economics 55, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-55#392514_392931_390655
The Covid crisis prompted an unprecedented global economic contraction. Although the worst is likely behind us, the recovery is likely to be uneven, with economic activity in many customer-facing service industries set to remain constrained for some time. I use a quantitative multi-industry model to estimate the economic forces that explain the decline in economic activity in the United States, the Euro Area, Japan and China in the first half of 2020. I then use the model to project the trajectory of the economic recovery. I find that the US, EA and Japan will each face a `98% economy' if half of the constraints faced by customer-facing service industries in the first half of 2020 persist. The economic recovery in China is projected to occur more quickly.
Rees, D (2020), ‘What comes next: Scenarios for the recovery‘, COVID Economics 55, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-55#392514_392931_390656
This paper analyzes a prominent dimension of the initial policy response to the COVID-19 pandemic observed in many countries: the imposition of export restrictions and actions to facilitate imports. Using weekly data on the use of trade policy instruments during the first seven months of the COVID-19 pandemic (January-July, 2020) we assess the relationship between the use of trade policy instruments and attributes of pre-crisis public procurement regulation. Controlling for country size, government effectiveness and economic factors, we find that use of export restrictions targeting medical products is strongly positively correlated with the total number of steps and average time required to complete procurement processes in the pre-crisis period. Membership of trade agreements encompassing public procurement disciplines is associated with actions to facilitate trade in medical products. These findings suggest future empirical assessments of the drivers of trade policy during the pandemic should consider public procurement systems.
Eknath, V, V Ereshchenko, B Hoekman and A Shingal (2020), ‘COVID-19, public procurement regimes and trade policy‘, COVID Economics 55, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-55#392514_392931_391056
Industrialization Â is Â vital Â for Â inclusive Â and Â sustainable Â global Â development. Â The Â two engines of industrialization â€“ innovation and trade â€“ are in danger of being compromised by the COVID-19 pandemic, Â under conditions Â increasingly reminiscent Â of the medieval world. Â It comes at a time when innovation had already been stagnating under guild-like corporate concentration and dominance, and the multilateral trade system had been buckling under pressure from a return to mercantilist ideas. Â The COVID-19 pandemic may cause a permanent reduction in innovation and entrepreneurship and may Â even Â bring Â the Â 4th Industrial Â Revolution Â (4IR) Â to Â a Â premature Â end. Â Hence Â the post-COVID-19 world may be left with trade as the only engine for industrialization for the foreseeable future. Â If the global community fails to fix the multilateral trade system, the world may start to resemble the Middle Ages in other, even worse, aspects.
Naudé, W (2020), ‘Industrialization under Medieval Conditions? Global Development after COVID-19‘, COVID Economics 55, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-55#392514_392931_390657
We examine possible reallocation effects on venture capital (VC) investment due to the spread of COVID-19 around the globe. Exploiting the staggered nature of the pandemic and transaction-level data, we empirically document a shift of venture capital towards deals in pandemic-related categories. A difference-in-differences analysis estimates significant increases in invested amount and number of deals in such categories. We further highlight several heterogenous effects related to the experience of VC investors, their organizational form, and country of origin. Our results underscore the link between the spread of the pandemic and the functioning of the VC market around the world.
Bellucci, A, A Borisov, G Gucciardi and A Zazzaro (2020), ‘The Reallocation Effects of COVID-19: Evidence from Venture Capital Investments around the World‘, COVID Economics 55, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-55#392514_392931_390658