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Journal ArticleDOI

The Economic Cost of COVID Lockdowns: An Out-of-Equilibrium Analysis.

19 Jun 2020-Vol. 4, Iss: 3, pp 1-21
TL;DR: This paper estimates the cost of the lockdown of some sectors of the world economy in the wake of COVID-19 using a multi sector disequilibrium model with buyer-seller relations between agents located in different countries and study the process of economic recovery following the end of the lockdowns.
Abstract: This paper estimates the cost of the lockdown of some sectors of the world economy in the wake of COVID-19. We develop a multi sector disequilibrium model with buyer-seller relations between agents located in different countries. The production network model allows us to study not only the direct cost of the lockdown but also indirect costs which emerge from the reductions in the availability of intermediate inputs. Agents determine the quantity of output and the proportions in which to combine inputs using prices that emerge from local interactions. The model is calibrated to the world economy using input-output data on 56 industries in 44 countries including all major economies. Within our model, the lockdowns are implemented as partial reductions in the output of some sectors using data on sectoral decomposition of capacity reductions. We use computational experiments to replicate the temporal sequence of the lockdowns implemented in different countries. World output falls by 7% at the early stage of the crisis when only China is under lockdown and by 23% at the peak of the crisis when many countries are under a lockdown. These direct impacts are amplified as the shock propagates through the world economy because of the buyer-seller relations. Supply-chain spillovers are capable of amplifying the direct impact by more than two folds. Naturally, the substitutability between intermediate inputs is a major determinant of the amplification. We also study the process of economic recovery following the end of the lockdowns. Price flexibility and minor technological adaptations help in reducing the time it takes for the economy to recover. The world economy takes about one quarter to move towards the new equilibrium in the optimistic and unlikely scenario of the end of all lockdowns. Recovery time is likely to be significantly greater if partial lockdowns persist.

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Citations
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Journal ArticleDOI
TL;DR: In this paper, the potential effects of the COVID-19 pandemic on the tourism industry were measured using panel structural vector auto-regression (PSVAR) on data from 1995 to 2019 in 185 countries and system dynamic modeling.

457 citations

Journal ArticleDOI
TL;DR: The proposed framework restricts the spread of CO VID-19 outbreaks, ensures the safety of the healthcare teams and maintains patients' physical and psychological healthcare conditions, and is designed to deal with the severe shortage of PPE for the medical team, reduce the massive pressure on hospitals, and track recovered patients to treat COVID-19 patients with plasma.

172 citations

Journal ArticleDOI
TL;DR: The epidemiological models show that across 8 countries a further week long delay in imposing lockdown would likely have cost more than half a million lives, and those countries which acted more promptly saved substantially more lives than those that delayed.
Abstract: Coronavirus has claimed the lives of over half a million people world-wide and this death toll continues to rise rapidly each day. In the absence of a vaccine, non-clinical preventative measures have been implemented as the principal means of limiting deaths. However, these measures have caused unprecedented disruption to daily lives and economic activity. Given this developing crisis, the potential for a second wave of infections and the near certainty of future pandemics, lessons need to be rapidly gleaned from the available data. We address the challenges of cross-country comparisons by allowing for differences in reporting and variation in underlying socio-economic conditions between countries. Our analyses show that, to date, differences in policy interventions have out-weighed socio-economic variation in explaining the range of death rates observed in the data. Our epidemiological models show that across 8 countries a further week long delay in imposing lockdown would likely have cost more than half a million lives. Furthermore, those countries which acted more promptly saved substantially more lives than those that delayed. Linking decisions over the timing of lockdown and consequent deaths to economic data, we reveal the costs that national governments were implicitly prepared to pay to protect their citizens as reflected in the economic activity foregone to save lives. These 'price of life' estimates vary enormously between countries, ranging from as low as around $100,000 (e.g. the UK, US and Italy) to in excess of $1million (e.g. Denmark, Germany, New Zealand and Korea). The lowest estimates are further reduced once we correct for under-reporting of Covid-19 deaths.

152 citations

Journal ArticleDOI
TL;DR: It is shown that global emissions from economic sectors will decrease by 3.9 to 5.6% in 5 years compared with a no-pandemic baseline scenario (business as usual for economic growth and carbon intensity decline) and smart policy is needed to turn pandemic-related emission declines into firm climate action.
Abstract: The global economy is facing a serious recession due to COVID-19, with implications for CO2 emissions. Here, using a global adaptive multiregional input–output model and scenarios of lockdown and fiscal counter measures, we show that global emissions from economic sectors will decrease by 3.9 to 5.6% in 5 years (2020 to 2024) compared with a no-pandemic baseline scenario (business as usual for economic growth and carbon intensity decline). Global economic interdependency via supply chains means that blocking one country’s economic activities causes the emissions of other countries to decrease even without lockdown policies. Supply-chain effects contributed 90.1% of emissions decline from power production in 2020 but only 13.6% of transport sector reductions. Simulations of follow-up fiscal stimuli in 41 major countries increase global 5-yr emissions by −6.6 to 23.2 Gt (−4.7 to 16.4%), depending on the strength and structure of incentives. Therefore, smart policy is needed to turn pandemic-related emission declines into firm climate action.

124 citations

Journal ArticleDOI
TL;DR: A combined research approach is adopted to describe the experience of the Contamination Lab of the University of Salento, an entrepreneurship education program focused on innovative and technology-based entrepreneurship for university students, and shows a new approach to entrepreneurial storytelling, pitching and business planning and development through digital technologies.

92 citations

References
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Journal ArticleDOI
TL;DR: The World Input-Output Database (WIOD) as mentioned in this paper contains annual time-series of world input-output tables and factor requirements covering the period from 1995 to 2011, and illustrates its usefulness by analyzing the geographical and factorial distribution of value added in global automotive production.
Abstract: This article provides guidance to prudent use of the World Input–Output Database (WIOD) in analyses of international trade. The WIOD contains annual time-series of world input–output tables and factor requirements covering the period from 1995 to 2011. Underlying concepts, construction methods and data sources are introduced, pointing out particular strengths and weaknesses. We illustrate its usefulness by analyzing the geographical and factorial distribution of value added in global automotive production and show increasing fragmentation, both within and across regions. Possible improvements and extensions to the data are discussed.

1,910 citations

Journal ArticleDOI
TL;DR: In this paper, the authors argue that in the presence of intersectoral input-output linkages, microeconomic idiosyncratic shocks may lead to aggregate fluctuations and that the rate at which aggregate volatility decays is determined by the structure of the network capturing such linkages.
Abstract: This paper argues that in the presence of intersectoral input-output linkages, microeconomic idiosyncratic shocks may lead to aggregate fluctuations. In particular, it shows that, as the economy becomes more disaggregated, the rate at which aggregate volatility decays is determined by the structure of the network capturing such linkages. Our main results provide a characterization of this relationship in terms of the importance of different sectors as suppliers to their immediate customers as well as their role as indirect suppliers to chains of downstream sectors. Such higher-order interconnections capture the possibility of “cascade effects” whereby productivity shocks to a sector propagate not only to its immediate downstream customers, but also indirectly to the rest of the economy. Our results highlight that sizable aggregate volatility is obtained from sectoral idiosyncratic shocks only if there exists significant asymmetry in the roles that sectors play as suppliers to others, and that the “sparseness” of the input-output matrix is unrelated to the nature of aggregate fluctuations.

1,174 citations

Posted Content

928 citations


"The Economic Cost of COVID Lockdown..." refers background in this paper

  • ...Barro and Grossman’s (1971) pioneering paper on general disequilibrium sparked a whole literature on understanding the dynamic properties of adjustments within a network economy. Some of these contributions are worth mentioning in the light of their significance in analyzing COVID dynamics. Benassy (1975) developed a model with decentralized trades in a money using economy with arbitrary many markets....

    [...]

  • ...Barro and Grossman’s (1971) pioneering paper on general disequilibrium sparked a whole literature on understanding the dynamic properties of adjustments within a network economy....

    [...]

  • ...Barro and Grossman’s (1971) pioneering paper on general disequilibrium sparked a whole literature on understanding the dynamic properties of adjustments within a network economy. Some of these contributions are worth mentioning in the light of their significance in analyzing COVID dynamics. Benassy (1975) developed a model with decentralized trades in a money using economy with arbitrary many markets. He intended to develop something comparable to the Arrow-Debreu system in its generality. Green and Laffont (1980) developed a model of disequilibrium inventory dynamics with a single storable output, money, and labor. Other important contributions include those by Rosen and Nadiri (1974), Sharp and Perkins (1977), and Muellbauer and Portes (1978). Economics of Disasters and Climate Change (2020) 4:431–451 434...

    [...]

  • ...Barro and Grossman’s (1971) pioneering paper on general disequilibrium sparked a whole literature on understanding the dynamic properties of adjustments within a network economy. Some of these contributions are worth mentioning in the light of their significance in analyzing COVID dynamics. Benassy (1975) developed a model with decentralized trades in a money using economy with arbitrary many markets. He intended to develop something comparable to the Arrow-Debreu system in its generality. Green and Laffont (1980) developed a model of disequilibrium inventory dynamics with a single storable output, money, and labor. Other important contributions include those by Rosen and Nadiri (1974), Sharp and Perkins (1977), and Muellbauer and Portes (1978)....

    [...]

  • ...Barro and Grossman’s (1971) pioneering paper on general disequilibrium sparked a whole literature on understanding the dynamic properties of adjustments within a network economy. Some of these contributions are worth mentioning in the light of their significance in analyzing COVID dynamics. Benassy (1975) developed a model with decentralized trades in a money using economy with arbitrary many markets. He intended to develop something comparable to the Arrow-Debreu system in its generality. Green and Laffont (1980) developed a model of disequilibrium inventory dynamics with a single storable output, money, and labor....

    [...]

Journal ArticleDOI
TL;DR: For example, the authors found that government restrictions on commercial activity and voluntary social distancing, operating with powerful effects in a service-oriented economy, are the main reasons the U S stock market reacted so much more forcefully to COVID-19 than to previous pandemics in 1918, 1957, and 1968.
Abstract: No previous infectious disease outbreak, including the Spanish Flu, has affected the stock market as forcefully as the COVID-19 pandemic In fact, previous pandemics left only mild traces on the U S stock market We use text-based methods to develop these points with respect to large daily stock market moves back to 1900 and with respect to overall stock market volatility back to 1985 We also evaluate potential explanations for the unprecedented stock market reaction to the COVID-19 pandemic The evidence we amass suggests that government restrictions on commercial activity and voluntary social distancing, operating with powerful effects in a service-oriented economy, are the main reasons the U S stock market reacted so much more forcefully to COVID-19 than to previous pandemics in 1918–1919, 1957–1958, and 1968

927 citations


"The Economic Cost of COVID Lockdown..." refers background in this paper

  • ...Baker et al. (2020), among others, have argued that the sizeably greater response of stock markets to COVID-19 may have something to do with the greater interlinkage of the global economy coupled with the supply-chain disruption caused by the lockdowns....

    [...]

Journal ArticleDOI
TL;DR: Acemoglu, Ozdaglar and Tahbaz-Salehi as mentioned in this paper combined material from Carvalho's Ph.D. dissertation at the University of Chicago (Carvalho, 2008) and ACEmoglu et al. (2010).
Abstract: This paper combines material from Carvalho’s Ph.D. dissertation at the University of Chicago (Carvalho, 2008) and Acemoglu, Ozdaglar, and Tahbaz-Salehi (2010). We thank the editor, Stephen Morris, and four anonymous referees for very helpful remarks and suggestions. We thank Stefana Stantcheva for excellent research assistance and Bill Kerr and Kaushik Ghosh for initial help with the NBER manufacturing productivity database. Carvalho thanks his advisor Lars Hansen and other members of his thesis committee, Robert Lucas and Timothy Conley. We are also grateful to John Fernald, Xavier Gabaix, Ali Jadbabaie, Alp Simsek, Hugo Sonnenschein, Jean Tirole, Jaume Ventura and numerous seminar and conference participants for useful feedback and suggestions. Carvalho acknowledges financial support from the Government of Catalonia (grant 2009SGR1157), the Spanish Ministry of Education and Science (grants Juan de la Cierva, JCI2009-04127, ECO2008-01665 and CSD2006-00016) and Barcelona GSE Research Network. Acemoglu, Ozdaglar and Tahbaz-Salehi acknowledge financial support from the Toulouse Network of Information Technology, National Science Foundation (Grant 0735956) and the Air Force Office of Scientific Research (Grant FA9550-09-1-0420).

910 citations