This paper describes a weekly economic index (WEI) developed to track the rapid economic developments associated with the response to the novel Coronavirus in the United States. The WEI shows a strong and sudden decline in economic activity starting in the week ending March 21, 2020. In the most recent week ending April 4, the WEI indicates economic activity has fallen further to -8.89% scaled to 4 quarter growth in GDP.
Lewis, D, K Mertens and J Stock (2020), ‘U.S. Economic Activity During the Early Weeks of the SARS-Cov-2 Outbreak‘, COVID Economics 6, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-6#392514_392882_390361
Many countries are shutting non-essential sectors of the economy to slow the spread of Covid-19. Older individuals have most to gain from slowing virus diffusion. Younger workers in sectors that are shuttered have the most to lose. In this paper we extend a standard epidemiological model of disease progression to include heterogeneity by age, and multiple sources of disease transmission. We then incorporate the epidemiological block into a multisector economic model in which workers differ by sector (basic and luxury) as well as by health status. We study optimal mitigation policies of a utilitarian government that can redistribute resources across individuals, but where such redistribution is costly. We show that optimal redistribution and mitigation policies interact, and reflect a compromise between the strongly diverging preferred policy paths across the subgroups of the population
Glover, A, J Heathcote, D Krueger and J Ríos-Rull (2020), ‘Health versus Wealth: On the Distributional Effects of Controlling a Pandemic‘, COVID Economics 6, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-6#392514_392882_391017
We provide quantitative predictions of first-order supply and demand shocks for the US economy associated with the COVID-19 pandemic at the level of individual occupations and industries. To analyze the supply shock, we classify industries as essential or non-essential and construct a Remote Labor Index, which measures the ability of different occupations to work from home. Demand shocks are based on a study of the likely effect of a severe influenza epidemic developed by the US Congressional Budget Office. Compared to the pre-COVID period, these shocks would threaten around 22% of the US economy's GDP, jeopardise 24% of jobs and reduce total wage income by 17%. At the industry level, sectors such as transport are likely to have output constrained by demand shocks, while sectors relating to manufacturing, mining and services are more likely to be constrained by supply shocks. Entertainment, restaurants and tourism face large supply and demand shocks. At the occupation level, we show that high-wage occupations are relatively immune from adverse supply and demandside shocks, while low-wage occupations are much more vulnerable. We should emphasize that our results are only first-order shocks â€“ we expect them to be substantially amplified by feedback effects in the production network.
Del Rio-Chanona, R, J Farmer, F Lafond, P Mealy and A Pichler (2020), ‘Supply and demand shocks in the COVID-19 pandemic: An industry and occupation perspective‘, COVID Economics 6, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-6#392514_392882_390362
In this paper, I examine the feasibility of working from home in developing countries. I take advantage of worker-level data from the STEP survey, which collects comparable information on employment outcomes across ten countries. I use information on workers' tasks to define the feasibility of working from home following Dingel and Neiman (2020). I extend the nascent literature on this topic by providing comparable cross-country evidence on the feasibility of telework. Only 13% of workers in STEP countries could work from home, yet this share ranges from 5.5% in Ghana to 23% in Yunnan (China). The feasibility of working from home is positively correlated with high-paying occupations. Educational attainment, formal employment status and household wealth are positively associated with the possibility of working from home, reflecting the vulnerability of various groups of workers. These relationships remain significant within narrowly defined occupations, yet exhibit heterogeneity across countries. I remark on the importance of rapidly identifying vulnerable workers to design adequate policies to combat the negative employment impacts of COVID-19.
Saltiel, F (2020), ‘Who Can Work From Home in Developing Countries?‘, COVID Economics 6, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-6#392514_392882_390363
Are pandemics systemically important to modern-day financial markets? This study uses the COVID-19 pandemic as a natural experiment for testing how large-scale pandemics affect the financial markets. Using hand-collected data at the firm level, I find that managers systematically underestimated their exposure to pandemics in their SEC-mandated risk factors, and the vast majority of firms decreased in value at the pandemic's onset. I also find that the pandemic triggered unprecedented changes in U.S. employment levels and the values of bonds, commodities, and currencies. These types of findings suggest that pandemics are systemically important to the financial markets. Overall, this study provides some of the first large-scale evidence on how pandemics affect the financial markets.
Schoenfeld, J (2020), ‘The Invisible Risk: Pandemics and the Financial Markets‘, COVID Economics 6, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-6#392514_392882_390384
We combine high-quality vital statistics data with annual income data at the municipality level to study the economic aftermath of the 1918-inuenza epidemic in Denmark. Controlling for pre-epidemic trends, we find that more severely affected municipalities experienced short-run declines in income, suggesting that the epidemic led to a V-shaped recession, with relatively moderate, negative effects and a full recovery after 2-3 years. Month-by-industry unemployment data shows that unemployment rates were high during the epidemic, but decreased again only a couple of months after it receded. This evidence also indicates that part of the economic downturn in 1918 predates the epidemic.
Dahl, C, C Dahl and C Hansen (2020), ‘The 1918 Flu Epidemic and the Economy: Evidence from Annual Municipal Income Data‘, COVID Economics 6, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-6#392514_392882_390385