C19 Health Economics Literature

Typical government responses to pandemics involve social distancing measures implemented to curb disease propagation. We evaluate the impact of state-mandated business closures in the context of the Covid-19 crisis in the US. Using state-level variations in the set of sectors defined as non-essential and forced to shut down, and geographic variations in industry composition, we estimate the effects of business closure decisions on firms’ market value, and on infection and death rates. We find that a 10 percentage point increase in the share of restricted labor is associated with a drop by 3 percentage points in April 2020 employment, a 1.87% drop in firms’ market value, and 0.15 and 0.011 percentage points lower Covid-19 infection and death rates, respectively. An extrapolation of these preliminary findings suggests that state-mandated business closures might have cost $700 billion...

This paper studies the labor market effects of non-pharmaceutical interventions (NPIs) to combat the COVID-19 pandemic. We focus on the Nordic countries which showed one of the highest variations in NPIs despite having similar community spread of COVID-19 at the onset of the pandemic: While Denmark, Finland and Norway imposed strict measures (`lockdowns’), Sweden decided for much lighter restrictions. Empirically, we use novel administrative data on weekly new unemployment and furlough spells from all 56 regions of the Nordic countries to compare the labor market outcomes of Sweden with the ones of its neighbors. Our evidence suggests that the labor markets of all countries were severely hit by the pandemic, although Sweden performed slightly better than its neighbors. Specifically, we find the worsening of the Swedish labor market to occur around 2 to 3 weeks later than in the other...

We investigate the short term labor market response to the pandemic in Italy and provide a first evaluation of the policies put in place to shield workers from the disruption of economic activity. Using administrative data on a sample of contracts active in the first quarter of 2020, we show that, before the pandemic, workers employed in non-essential activities were in majority men, younger than 35 years old, located in the North of the country and with lower levels of education. When looking at the change in hirings and separations and decomposing it by age, gender, region, type of contract (open-ended or temporary), education level, and sector (essential vs non-essential activities), we find that from the nineth week of the year, there was a pronounced drop in hirings and terminations. On the contrary, firings and quits spiked right after the nineth week, and then dropped...

The Netherlands has recently closed down primary and secondary education in response to the covid-19 pandemic. Using a SIR (Susceptibles-Infected-Recovered) model for the Netherlands, this closure is shown to be counter-productive (as it increases future vulnerability to infection) and hard to reverse (since the increased vulnerability demands continuation). Though the rise of B117 (“the British version”) has been used to argue for school-closure, B117 increases the negative effects of school-closure. School-closure has been based on a misunderstanding of the dynamics in a multi-group SIR model. Furthermore, immunity by prior infection is shown to provide a larger contribution to ending the pandemic than vaccination. Finally, a cost-benefit analysis shows school-closure to be extremely costly. Behavioural economics explains why decision making and the public debate are so...

This paper analyzes the epidemiological and economic effects of quarantines. We use a basic epidemiologic model, a SEIR-model, that is calibrated to roughly resemble the COVID-19 pandemic, and we assume that individuals that become infected or are isolated on average lose a share of their productivity. An early quarantine will essentially postpone but not alter the course of the infection at a cost that increases in the duration and the extent of the quarantine. A quarantine starting at a later stage of the pandemic reduces the number of infected persons and economic losses, but generates a higher peak level of infectious people. A longer quarantine dampens the peak of the pandemic and reduces deaths, but implies higher economic losses. Both the peak share of infectious individuals and economic losses are U-shaped in relation to the share of the population in quarantine. A quarantine...

The outbreak of Coronavirus named COVID-19 world has disrupted the Chinese economy and is spreading globally. The evolution of the disease and its economic impact is highly uncertain which makes it difficult for policymakers to formulate an appropriate macroeconomic policy response. In order to better understand possible economic outcomes, this paper explores seven different scenarios of how COVID-19 might evolve in the coming year using a modelling technique developed by Lee and McKibbin (2003) and extended by McKibbin and Sidorenko (2006). It examines the impacts of different scenarios on macroeconomic outcomes and financial markets in a global hybrid DSGE/CGE general equilibrium model. The scenarios in this paper demonstrate that even a contained outbreak could significantly impact the global economy in the short run. These scenarios demonstrate the scale of costs that might be...

We extract aggregate demand and supply shocks for the US economy from real-time survey data on inflation and real GDP growth using a novel identification scheme. Our approach exploits non-Gaussian features of macroeconomic forecast revisions and imposes minimal theoretical assumptions. After verifying that our results for US post-war business cycle fluctuations are largely in line with the prevailing consensus, we proceed to study output and price fluctuations during COVID-19. We attribute two thirds of the decline in 2020:Q1 GDP to a negative shock to aggregate demand. In contrast, regarding the staggeringly large decline in GDP in 2020:Q2, we estimate two thirds of this shock was due to a reduction in aggregate supply. Statistical analysis suggests a slow recovery due to persistent effects of the supply shock, but surveys suggest a somewhat faster rebound with a recovery in...

Fragmented by policies, united by outcomes: This is the picture of the United States that emerges from our analysis of the spatial diffusion of Covid-19 and the scattered lock-down policies introduced by individual states to contain it. We first use spatial econometric techniques to document direct and indirect spillovers of new infections across county and state lines, as well as the impact of individual states’ lock-down policies on infections in neighboring states. We find consistent statistical evidence that new cases diffuse across county lines, holding county level factors constant, and that the diffusion across counties was affected by the closure policies of adjacent states. Spatial impulse response functions reveal that the diffusion across counties is persistent for up to ten days after an increase in adjacent counties. We then develop a spatial version of the...

We explore impacts of the pandemic crisis and associated restrictions to economic activity on paid and unpaid work for men and women in the UK. Using data from the Covid-19 supplement of Understanding Society, we find evidence that labour market outcomes of men and women were roughly equally affected at the extensive margin, as measured by the incidence of job loss or furloughing, but if anything women suffered smaller losses at the intensive margin, experiencing slightly smaller changes in hours and earnings. Within the household, women provided on average a larger share of increased childcare needs, but in an important share of households fathers became the primary childcare providers. These distributional consequences of the pandemic may be important to understand its inequality legacy over the longer term.

COVID-19 became a global health emergency when it threatened the catastrophic collapse of health systems as demand for health goods and services and their relative prices surged. Governments responded with lockdowns and increases in transfers. Empirical evidence shows that lockdowns and healthcare saturation contribute to explain the cross-country variation in GDP drops even after controlling for COVID-19 cases and mortality. We explain this output-pandemia tradeoff as resulting from a shock to subsistence health demand that is larger at higher capital utilization in a model with entrepreneurs and workers. The health system moves closer to saturation as the gap between supply and subsistence narrows, which worsens consumption and income inequality. An externality distorts utilization because firms do not internalize that lower utilization relaxes healthcare saturation. The optimal...