Dirk Niepelt, Martín Gonzalez-Eiras, 11 January 2021

Infection externalities are a key feature of the Covid-19 pandemic, as individuals fail to account for the full consequences of their actions. This column develops a model of infection dynamics and economic choices and studies the resulting optimal policy outcomes. Under a scenario of the pandemic ending deterministically following an effective vaccination campaign, the model suggests that countries whose vaccination campaigns are proceeding quickly should impose a strict lockdown, while countries whose campaigns will not be completed within a few months should not impose a lockdown at all. In contrast, if the appearance of a cure is more ‘stochastic' – for example, if the virus mutates further or the vaccines turn out to be less effective than hoped – optimal policy calls for alternating between lockdowns and ‘inverse lockdowns’, with the latter stimulating social interaction.

Tinglong Dai, Shubhranshu Singh, 23 December 2020

The US continues to struggle with insufficient COVID-19 testing capacity. At the same time, US laboratories use ultrasensitive diagnostic criteria in their tests, leading to a large proportion of positive diagnoses associated with negligible viral loads. This column seeks to construct a theory that explains both undertesting and overdiagnosis. The theory predicts both phenomena may arise in the absence of mandatory viral load reporting. Despite the obvious clinical advantages of viral load reporting, mandating such reporting may not be optimal when considering laboratories’ capacity building decisions and potential benefits of widespread quarantining. 

Debora Revoltella, Pedro J. F. de Lima, 21 December 2020

The Covid-19 pandemic poses severe risks for Europe’s economy, but it also presents opportunities. The sharp short-term shock will be followed by large structural changes to the global economy in the long term. This column sheds light on the challenges ahead using data from the European Investment Bank Investment Survey. Large sectors of Europe’s economy, particularly SMEs, need to innovate and adopt digital technologies to avoid falling behind. Policy support needs to evolve from liquidity provision to a more targeted push for structural transformation. 

Leonard Goebel, Thomas Mayrhofer, Hendrik Schmitz, 12 December 2020

Many people tend to avoid the worst outcome when making decisions – a concept known as ‘prudence’. This column presents results from an experimental setting which relate risk attitudes to willingness to get vaccinated. It shows that more prudent individuals are less likely to take a vaccine. Moreover, this effect is stronger in risk groups, such as older participants and those with pre-existing illnesses. The findings could help politicians convince people to get vaccinated against Covid-19, by appealing not only to risk assessments but also to social responsibility.

Anna McDougall, George Orlov, Douglas McKee, 10 December 2020

Many higher learning institutions have shifted to remote learning in response to the COVID-19 pandemic. Although research has found that online classes can be just as effective as in-person classes, there is evidence that suggests disadvantaged students may perform relatively worse. This column compares student performance on a set of standard assessments at four PhD-granting institutions in the US before and after the switch to online classes. It finds little evidence that disadvantaged groups were further disadvantaged by the pandemic in their college learning. Instructor experience with online teaching and the use of active-learning techniques have a positive effect on student outcomes.

Matthew Spiegel, Heather E. Tookes, 07 December 2020

As the COVID-19 pandemic continues worldwide, policymakers are still grappling with the question of which non-pharmaceutical policy interventions are effective. In the US, state and county policies varied widely, as did the growth in fatalities due to COVID-19. This column examines US business policies to help shed light on which policies save more lives. Stay-at-home orders, mandatory mask requirements, beach and park closures, restaurant closures, and high-risk (Level 2) business closures most consistently predict lower fatality growth four to six weeks ahead. Closures of low- and medium-risk businesses do not appear effective and, despite their costs, may even be counterproductive.

Francesca Caselli, Francesco Grigoli, Weicheng Lian, Damiano Sandri, 16 November 2020

Non-pharmaceutical interventions remain key to slow the spread of the COVID-19 pandemic. This column examines the impact of lockdowns on mobility in a large number of countries during the first seven months of the pandemic. Both lockdowns and voluntary social distancing helped contain the first wave of COVID-19. In particular, stringent and rapidly adopted lockdowns significantly slowed the spread of the virus. Despite their short-term economic costs, early and tight lockdowns may pave the way to a faster recovery.

Margareta Drzeniek, Sheana Tambourgi, Ilaria Marchese, 12 November 2020

COVID-19 is accelerating structural transformations, notably towards more digitalised and more automated economies. This column presents a COVID-19 economic recovery index which considers the extent to which a country is exposed to major health effects from COVID-19, the degree to which a country’s economy will be affected by the crisis, and a country’s capacity to recover and rebuild to pre-COVID-19 levels. To guide their economies out of this crisis and to ready them for the coming transformation, governments need to restore trade flows, manage the risks of slowing global economic convergence, and actively prepare for accelerating economic transformation.

Roberto De Santis, Wouter Van der Veken, 11 November 2020

Understanding the economic impacts of a global pandemic is a key challenge for the economics profession. This column analyses the 1918-1920 Spanish flu to gain insights about the expected output losses and downside risks from such an event. It estimates an average output drop of 7% across the globe over the years 1918-1920, increased macroeconomic risks, and an increase in income inequality across countries. The expected real income loss is nearly twice as large for lower-income countries. As for the US, the estimated output fall due to the Spanish flu is small, but the macroeconomic risks are not negligible.

Vincenzo Galasso, Vincent Pons, Paola Profeta, 07 November 2020

The efficacy of government lockdown measures to contain COVID-19 hinges on people’s willingness to comply. It is critical to identify and convince those who are the least compliant. This column surveyed over 21,000 respondents in eight OECD countries, in March and April 2020, on beliefs about COVID-19 and containment measures and their level of compliance with the measures. Men and women differ strikingly in both beliefs and behaviours, with women are more likely to take the pandemic seriously and more compliant than men. The findings suggest that public health communication should target men and women differently.

David Johnston, Claryn Kung, Michael A Shields, 05 November 2020

Building individual resilience is an important policy priority in many countries. This involves maintaining healthy levels of psychological and physical functioning in the presence of adverse events. This column documents the dramatic impact of the Covid-19 crisis on psychological distress in the UK. It shows neither financial resources nor religiosity, neighbourhood social capital, or cognitive skills were associated with a more resilient response to the crisis. In contrast, it finds that the non-cognitive skill ‘self-efficacy’ has been a strong predictor of resilience during the pandemic.

Joshua Aizenman, Hiro Ito, 27 October 2020

The economic policies of the US in the post-COVID era will have important implications for the global economy. This column outlines two different exit strategies for the US from the COVID-related debt-overhang and analyses their implications for emerging markets and global stability. A strategy of continuing loose fiscal policies and accommodating monetary policies may spur short-term growth but would also increase the risks a deeper crisis in the future. Alternatively, the US could adopt a two-pronged approach of shifting fiscal priorities towards expenses with high social payoffs and then promoting fiscal adjustments aimed at a primary surplus and debt resilience. The post-WWII success story illustrates the feasibility of, and gains from, a two-pronged fiscal strategy.

Guido Alfani, 15 October 2020

The relationship between pandemics and inequality is of significant interest at the moment. The Black Death in the 14th century is one salient example of a pandemic which dramatically decreased wealth inequality, but this column argues that the Black Death is exceptional in this respect. Pandemics in subsequent centuries have failed to significantly reduce inequality, due to different institutional environments and labour market effects. This evidence suggests that inequality and poverty are likely to increase in the aftermath of the Covid-19 crisis.

Jay Hyun, Daisoon Kim, Seung-Ryong Shin, 10 October 2020

During periods of turmoil such as the Covid-19 pandemic, firms with more resilient business models tend to survive and expand more than others. This column presents evidence that firms with higher global connectedness and market power are more resilient to domestic pandemic shocks. While global production and export networks expose firms to foreign pandemic shocks, they potentially make firms less susceptible to domestic pandemic shocks through diversification of suppliers and markets. In addition, higher market power could provide buffers by allowing bigger margins of adjustment. 

Alexander Karaivanov, Shih En Lu, Hitoshi Shigeoka, 09 October 2020

The mandatory wearing of face masks remains a contentious policy issue during the COVID-19 pandemic. This column evaluates the impact of mask mandates on the spread of COVID-19 in Canada, using the different timings that masks were mandated across the 34 health districts of the province of Ontario. Mask mandates are associated with a 25% or larger weekly reduction in new COVID-19 cases in July and August, relative to the absence of mandates. Requiring indoor masks nationwide in early July could have reduced new COVID-19 cases in Canada by 25%–40% in mid-August, which translates into between 700 and 1,100 fewer cases per week.

Claudia Foroni, Massimiliano Marcellino, Dalibor Stevanovic, 29 September 2020

Forecasting the recession and recovery from the COVID-19 crisis is of substantial policy interest. The pandemic shock shares both similarities and differences with previous crises, such as the financial crisis of 2007-2009. This column evaluates the ability of different forecasting and nowcasting approaches to predict the COVID-19 economic shock and forecast the potential recovery path. It shows that adjusting for forecasting errors made during the financial crisis of 2007-2009 better aligns the COVID forecasts with observed data. The results suggest a slow recovery to pre-COVID-19 levels, lasting several years.

Paul De Grauwe, Yuemei Ji, 24 September 2020

The coronavirus pandemic caused a catastrophic collapse in the world economy. This column analyses the path of this decline and compares it to two other major global crises: the Great Depression in the 1930s and the Great Recession following the banking crisis of 2007-2008. It argues that COVID-19 led to both negative demand and supply shocks, resulting in a contraction of industrial production at an unprecedented pace. However, a combination of strong government policies and a functioning banking sector have led to a swifter rebound in economic activity following the coronavirus shock in comparison with the previous two crises.

Jose Maria Barrero, Nicholas Bloom, Steven Davis, 23 September 2020

The COVID-19 pandemic triggered a sudden, massive shift around the world to working from home. While there is great concern how this will affect inequality and how the economy will adjust, the shift has also saved billions of hours of commuting time in the US alone. Drawing on original surveys, this column estimates that the shift to working from home lowers commuting time among Americans by more than 60 million hours per workday. Americans devote about a third of the time savings to their primary jobs and about 60% to other work activities, including household chores and childcare. The allocation of time savings differs substantially by education group and between persons with and without children at home.

Demosthenes Ioannou, Maria Sole Pagliari, Livio Stracca, 18 September 2020

The debate over the incomplete and fragile nature of Europe’s Economic and Monetary Union has been revived by the Covid-19 pandemic. This column shows that adverse shocks within EMU can be identified and are transmitted to the rest of the world, with implications for economic activity and trade in advanced and emerging economies. Despite the important steps taken during the pandemic by euro area authorities, the drive to complete EMU with a genuine fiscal and financial union needs to continue for the sake of both the euro area and the rest of the world.

Andreas Fuchs, Lennart Kaplan, Krisztina Kis-Katos, Sebastian S. Schmidt, Felix Turbanisch, Feicheng Wang, 16 September 2020

China assumed an important role during the worldwide outbreak of COVID-19 as the main exporter of critical medical goods such as face masks and disinfectants. However, shipments of medical goods have been turned into propaganda campaigns by Chinese state media, raising the question if access to medical goods is granted upon political goodwill. This column uses official monthly trade data from Chinese Customs to investigate the emerging trade patterns, both for commercial exports and donations of medical goods. It shows that both existing trade linkages and political ties to Chinese provinces can help to attract Chinese medical goods.

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