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Pandemic Recession: L or V-Shaped?
From the Abstract: "We develop and calibrate a search-theoretic model of the labor market in order to forecast the evolution of the aggregate US labor market during and after the coronavirus pandemic. The model is designed to capture the heterogeneity of the transitions of individual workers across states of unemployment, employment and across different employers. The model is also designed to capture the trade-offs in the choice between temporary and permanent layoffs. Under reasonable parametrizations of the model, the lockdown instituted to prevent the spread of the novel coronavirus is shown to have long-lasting negative effects on unemployment. This is so because the lockdown disproportionately disrupts the employment of workers who need years to find stable jobs."
National Bureau of Economic Research
Gregory, Victoria; Menzio, Guido; Wiczer, David G.
2020-05
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First Weeks of the Coronavirus Crisis: Who Got Hit, When and Why? Evidence from Norway
From the Abstract: "Using real-time register data we document the magnitude, dynamics and socio-economic characteristics of the crisis-induced temporary and permanent layoffs in Norway. We find evidence that the effects of social distancing measures quickly spread to industries that were not directly affected by policy. Close to 90% of layoffs are temporary, although this classification may change as the crisis progresses. Still, there is suggestive evidence of immediate stress on a subset of firms that manifests itself in permanent rather than temporary layoffs. We find that the shock had a strong socio-economic gradient, hit a financially vulnerable population, and parents with younger children, and was driven by layoffs in smaller, less productive, and financially weaker firms. Consequently though, the rise in unemployment likely overstates the loss of output associated with the layoffs by about a third."
National Bureau of Economic Research
Alstadsæter, Annette; Bratsberg, Bernt; Eielsen, Gaute . . .
2020-05
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Brazilian Bombshell? The Long-Term Impact of the 1918 Influenza Pandemic the South American Way
From the Abstract: "We analyze the repercussions of the 1918 Influenza Pandemic on demographic measures, human capital formation, and productivity markers in the state of Sao Paulo, Brazil's financial center and the most populous city in South America today. Leveraging temporal and spatial variation in district-level estimates of influenza-related deaths for the period 1917-1920 combined with a unique database on socio-economic, health and productivity outcomes constructed from historical and contemporary documents for all districts in Sao Paulo, we find that the 1918 Influenza pandemic had significant negative impacts on infant mortality and sex ratios at birth in 1920 (the short-run). We find robust evidence of persistent effects on health, educational attainment and productivity more than twenty years later. Our study highlights the importance of documenting the legacy of historical shocks in understanding the development trajectories of countries over time."
National Bureau of Economic Research
Guimbeau, Amanda; Menon, Nidhiya; Musacchio, Aldo
2020-04
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Model of Asset Price Spirals and Aggregate Demand Amplification of a 'COVID-19' Shock
From the Abstract: "We provide a model of endogenous asset price spirals and severe aggregate demand contractions following a large real (non-financial) shock. The key mechanism stems from the drop in the wealth share of the economy's risk-tolerant agents: as a recessionary shock hits the economy, their wealth declines and their leverage rises endogenously, causing them to o- oad [sic] some risky assets. When monetary policy is unconstrained, it can offset the decline in risk tolerance with an interest rate cut that boosts the market's Sharpe ratio. However, if the interest rate policy is constrained, new contractionary feedbacks arise: recessionary shocks not only lead to reduced risk tolerance but also to further asset price and output drops, which feed the risk-off episode and trigger a downward loop. When pre-shock leverage ratios are high, multiple equilibria are possible, including one where risk-tolerant agents go bankrupt. A large-scale asset purchases (LSAPs) policy can be highly effective in this environment, as it reverses the downward asset price spiral. In an extension, we show how corporate debt overhang problems exacerbate our mechanism. The Covid-19 [coronavirus disease 2019] shock and the large response by all the major central banks provide a vivid illustration of the environment we seek to capture."
National Bureau of Economic Research
Caballero, Ricardo J.; Simsek, Alp
2020-05
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Aggregate and Firm-Level Stock Returns During Pandemics, in Real Time
From the Abstract: "We show that unexpected changes in the trajectory of COVID-19 [coronavirus disease 2019] infections predict US stock returns, in real time. Parameter estimates indicate that an unanticipated doubling (halving) of projected infections forecasts next-day decreases (increases) in aggregate US market value of 4 to 11 percent, indicating that equity markets may begin to rebound even as infections continue to rise, if the trajectory of the disease becomes less severe than initially anticipated. Using the same variation in unanticipated projected cases, we find that COVID-19-related losses in market value at the firm level rise with capital intensity and leverage, and are deeper in industries more conducive to disease transmission. These relationships provide important insight into current record job losses. Measuring US states' drops in market value as the employment weighted average declines of the industries they produce, we find that states with milder drops in market value exhibit larger initial jobless claims per worker. This initially counter-intuitive result suggests that investors value the relative ease with which labor versus capital costs can be shed as revenues decline."
National Bureau of Economic Research
Alfaro, Laura; Chari, Anusha, 1969-; Greenland, Andrew N. . . .
2020-05
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Reopening Scenarios
From the Abstract: "We use a five-age epidemiological model, combined with 66-sector economic accounting, to address a variety of questions concerning the economic reopening. We calibrate/estimate the model using contact survey data and data on weekly historical individual actions and nonpharmaceutical interventions in the weeks ending March 8 - May 16, 2020. Going forward, we model a decision-maker (governor) as following reopening guidelines like those proposed by the White House and the CDC [Centers for Disease Control and Prevention. The sectoral accounting, combined with information on personal proximity and ability to work from home by sector, make it possible to construct a GDP [gross domestic product]-to-Risk index of which sectors provide the greatest increment in GDP per marginal increase in R0. Through simulations, we find that: a strong economic reopening is possible; a 'smart' reopening, preferencing some sectors over others, makes only modest improvements over a broad reopening; and all this hinges on retaining strong restrictions on non-work social contacts. If non-work contacts - going to bars, shopping without social distancing and masks, large group gatherings, etc. - return only half-way to the pre-COVID-19 [coronavirus disease 2019] baseline, the current decline in deaths reverses leading to a second wave of business closures."
National Bureau of Economic Research
Baqaee, David Rezza; Farhi, Emmanuel; Mina, Michael J. . . .
2020-05
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Firm-Level Exposure to Epidemic Diseases: COVID-19, SARS, and H1N1
From the Abstract: "Using tools described in our earlier work (Hassan et al., 2019, 2020), we develop text-based measures of the costs, benefits, and risks listed firms in the US and over 80 other countries associate with the spread of Covid-19 [coronavirus disease 2019] and other epidemic diseases. We identify which firms expect to gain or lose from an epidemic disease and which are most affected by the associated uncertainty as a disease spreads in a region or around the world. As Covid-19 spread globally in the first quarter of 2020, firms' primary concerns relate to the collapse of demand, increased uncertainty, and disruption in supply chains. Other important concerns relate to capacity reductions, closures, and employee welfare. Financing concerns were mentioned relatively rarely in the first quarter but appear to become a more important concern in the second quarter. We also identify some firms that foresee opportunities in new or disrupted markets due to the spread of the disease. Finally, we find some evidence that firms that have experience with SARS [severe acute respiratory syndrome] or H1N1 have more positive expectations about their ability to deal with the coronavirus outbreak."
National Bureau of Economic Research
Hassan, Tarek Alexander; Hollander, Stephan; Van Lent, Laurence . . .
2020-05
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Understanding Spatial Variation in COVID-19 Across the United States
From the Abstract: "We analyze the correlates of COVID-19 [coronavirus disease 2019] cases and deaths across US counties. We consider a wide range of correlates - population density, public transportation, age structure, nursing home residents, connectedness to source countries, among others - in an effort to pinpoint factors explaining differential severity of the disease at the county level. The patterns we identify are meant to improve our understanding of the drivers of the spread of COVID-19, with an eye toward helping policymakers design responses that are sensitive to the specificities of different locations."
National Bureau of Economic Research
Desmet, Klaus; Wacziarg, Romain
2020-06
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Note on Long-Run Persistence of Public Health Outcomes in Pandemics
From the Abstract: "Covid-19 [coronavirus disease 2019] is the single largest threat to global public health since the Spanish Influenza pandemic of 1918-20. Was the world better prepared in 2020 than it was in 1918? After a century of public health and basic science research, pandemic response and mortality outcomes should be better than in 1918-20. We ask whether mortality from historical pandemics has any predictive content for mortality in the ongoing Covid-19 pandemic. We find a strong persistence in public health performance in the early days of the Covid-19 pandemic. Places that performed poorly in terms of mortality in 1918 were more likely to have higher mortality today. This is true across countries and across a sample of US cities. Experience with SARS [severe acute respiratory syndrome] is associated with lower mortality today. Distrust of expert advice, lack of cooperation at many levels, over-confidence, and health care supply shortages have likely promoted higher mortality today as in the past."
National Bureau of Economic Research
Lin, Peter Zhixian; Meissner, Christopher M. (Christopher Michael)
2020-06
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Sequential Lifting of COVID-19 Interventions with Population Heterogeneity
From the Abstract: "This paper analyzes a sequential approach to lifting interventions in the COVID-19 [coronavirus disease 2019] pandemic taking heterogeneity in the population into account. The population is heterogeneous in terms of the consequences of infection (need for hospitalization and critical care, and mortality) and in terms of labor force participation. Splitting the population in two groups by age, a less affected younger group that is more likely to work, and a more affected older group less likely to work, and lifting interventions sequentially (for the younger group first and the older group later on) can substantially reduce mortality, demands on the health care system, and the economic cost of interventions."
National Bureau of Economic Research
Rampini, Adriano A.
2020-04
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COVID-19 Doesn't Need Lockdowns to Destroy Jobs: The Effect of Local Outbreaks in Korea
From the Abstract: "Unlike most countries, Korea did not implement a lockdown in its battle against COVID-19 [coronavirus disease 2019], instead successfully relying on testing and contact tracing. Only one region, Daegu-Gyeongbuk (DG), had a significant number of infections, traced to a religious sect. This allows us to estimate the causal effect of the outbreak on the labor market using difference-in-differences. We find that a one per thousand increase in infections causes a 2 to 3 percent drop in local employment. Noncausal estimates of this coefficient from the US and UK, which implemented large-scale lockdowns, range from 5 to 6 percent, suggesting that at most half of the job losses in the US and UK can be attributed to lockdowns. We also find that employment losses caused by local outbreaks in the absence of lockdowns are (i) mainly due to reduced hiring by small establishments, (ii) concentrated in the accommodation/food, education, real estate, and transportation industries, and (iii) worst for the economically vulnerable workers who are less educated, young, in low-wage occupations, and on temporary contracts, even controlling for industry effects. All these patterns are similar to what we observe in the US and UK: The unequal effects of COVID-19 are the same with or without lockdowns. Our finding suggests that the lifting of lockdowns in the US and UK may lead to only modest recoveries in employment unless COVID-19 infection rates fall."
National Bureau of Economic Research
Aum, Sangmin; Lee, Sang Yoon (Economist); Shin, Yongseok
2020-05
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Group Testing in a Pandemic: The Role of Frequent Testing, Correlated Risk, and Machine Learning
From the Abstract: "Group testing increases efficiency by pooling patient specimens and clearing the entire group with one negative test. Optimal grouping strategy is well studied in one-off testing scenarios with reasonably well-known prevalence rates and no correlations in risk. We discuss how the strategy changes in a pandemic environment with repeated testing, rapid local infection spread, and highly uncertain risk. First, repeated testing mechanically lowers prevalence at the time of the next test. This increases testing efficiency, such that increasing frequency by x times only increases expected tests by around √x rather than x. However, this calculation omits a further benefit of frequent testing: infected people are quickly removed from the population, which lowers prevalence and generates further efficiency. Accounting for this decline in intra-group spread, we show that increasing frequency can paradoxically reduce the total testing cost. Second, we show that group size and efficiency increases with intra-group risk correlation, which is expected in natural test groupings based on proximity. Third, because optimal groupings depend on uncertain risk and correlation, we show how better estimates from machine learning can drive large efficiency gains. We conclude that frequent group testing, aided by machine learning, is a promising and inexpensive surveillance strategy."
National Bureau of Economic Research
Augenblick, Ned; Kolstad, Jonathan T.; Obermeyer, Ziad . . .
2020
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Did the Paycheck Protection Program Hit the Target?
From the Abstract: "This paper takes an early look at the Paycheck Protection Program (PPP), a large and novel small business support program that was part of the initial policy response to the COVID-19 [coronavirus disease 2019] pandemic. We use new data on the distribution of the first round of PPP loans and high-frequency microlevel employment data to consider two dimensions of program targeting. First, we do not find evidence that funds flowed to areas more adversely affected by the economic effects of the pandemic, as measured by declines in hours worked or business shutdowns. If anything, funds flowed to areas less hard hit. Second, we find significant heterogeneity across banks in terms of disbursing PPP funds, which does not only reflect differences in underlying loan demand. The top-4 banks alone account for 36% of total pre-policy small business loans, but disbursed less than 3% of all PPP loans in the first round. Areas that were significantly more exposed to low PPP banks received much lower loan allocations. We do not find evidence that the PPP had a substantial effect on local economic outcomes--including declines in hours worked, business shutdowns, initial unemployment insurance claims, and small business revenues--during the first round of the program. Firms appear to use first round funds to build up savings and meet loan and other commitments, which points to possible medium-run impacts. As data become available, we will continue to study employment and establishment responses to the program and the impact of PPP support on the economic recovery. Measuring these responses is critical for evaluating the social insurance value of the PPP and similar policies."
National Bureau of Economic Research
Granja, João; Makridis, Christos A.; Yannelis, Constantine . . .
2020-11
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Limited Supply and Lagging Enrollment: Production Technologies and Enrollment Changes at Community Colleges During the Pandemic
From the Abstract: "Weak labor markets typically lead young workers to invest in skills. High unemployment during COVID [coronavrius disease] diverged from prior downturns: enrollment at community colleges dropped by 9.5 percent between 2019 and 2020, with the drop larger among men. COVID disruptions generated supply-side impacts on courses of study requiring significant capital and 'hands on' experiential learning, particularly programs that deliver of assembly, repair and maintenance (ARM) skills. Community colleges that had relative concentrations of credentials in ARM fields pre-pandemic experienced relatively large enrollment declines. The decline in ARM enrollment explains nearly all the difference in enrollment declines by gender during COVID."
National Bureau of Economic Research
Turner, Sarah E., 1966-; Schanzenbach, Diane, 1972-
2022-01
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Using Donald Trump's COVID-19 Vaccine Endorsement to Give Public Health a Shot in the Arm: A Large-Scale Ad Experiment
From the Abstract: "We report a large-scale randomized controlled trial designed to assess whether the partisan cue of a provaccine message from Donald Trump would induce Americans to get COVID-19 [coronavirus disease 2019] vaccines. Our study involved presenting a 27-second advertisement to millions of U.S. YouTube users in October 2021. Results indicate that the campaign increased the number of vaccines in the average treated county by 103. Spread across 1,014 treated counties, the total effect of the campaign was an estimated increase of 104,036 vaccines. The campaign was cost-effective: with an overall budget of about $100,000, the cost to obtain an additional vaccine was about $1 or less."
National Bureau of Economic Research
Larsen, Bradley; Hetherington, Marc J., 1968-; Greene, Steven H., 1972- . . .
2022-04
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Optimal Targeted Lockdowns in a Multi-Group SIR Model
From the Abstract: "We study targeted lockdowns in a multi-group SIR [Susceptible, Infected and Recovered] model where infection, hospitalization and fatality rates vary between groups--in particular between the 'young', 'the middle-aged' and the 'old'. Our model enables a tractable quantitative analysis of optimal policy. For baseline parameter values for the COVID-19 [coronavirus disease 2019] pandemic applied to the US, we find that optimal policies differentially targeting risk/age groups significantly outperform optimal uniform policies and most of the gains can be realized by having stricter lockdown policies on the oldest group. Intuitively, a strict and long lockdown for the most vulnerable group both reduces infections and enables less strict lockdowns for the lower-risk groups. We also study the impacts of group distancing, testing and contract tracing, the matching technology and the expected arrival time of a vaccine on optimal policies. Overall, targeted policies that are combined with measures that reduce interactions between groups and increase testing and isolation of the infected can minimize both economic losses and deaths in our model."
National Bureau of Economic Research
Acemoglu, Daron; Chernozhukov, Victor; Werning, Iván . . .
2020-05
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Testing, Voluntary Social Distancing and the Spread of an Infection
From the Abstract: "We study the effects of testing policy on voluntary social distancing and the spread of an infection. Agents decide their social activity level, which determines a social network over which the virus spreads. Testing enables the isolation of infected individuals, slowing down the infection. But greater testing also reduces voluntary social distancing or increases social activity, exacerbating the spread of the virus. We show that the effect of testing on infections is non-monotone. This non-monotonicity also implies that the optimal testing policy may leave some of the testing capacity of society unused."
National Bureau of Economic Research
Acemoglu, Daron; Ozdaglar, Asuman E.; Makhdoumi, Ali (Makhdoumi Kakhaki) . . .
2020-07
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Inequalities in the Times of a Pandemic
From the Introduction: "Covid-19 [coronavirus disease 2019] has exacerbated existing inequalities. This paper reviews the evidence to date on how long-standing fractures have been put into sharp relief by the pandemic and discusses policies to address them. The inequalities described take many forms and express themselves along various dimensions that interact with each other. Across the income distribution, pre-tax income inequalities, consumption and savings, job losses, and opportunities for remote work have evolved very differently. Across genders, and across parents and non-parents, the toll of school closures, lack of child care, and additional housework has been uneven. Across regions, sectors, and occupations, the pandemic has brought vastly different burdens and opportunities. The policies discussed in this paper are medium and longer-term policy actions to address the long-standing inequalities that predate and have been widened by Covid-19, rather than short-run crisis mitigation responses. These policy actions need to occur at multiple levels, given the challenges and complexities of the issues, and we offer a framework to think about these various possible stages of interventions. The paper is organized as follows. The first four sections review the evidence on the evolution of inequalities along several dimensions: across income levels (Section 2); across sectors and regions (Section 3); across genders (Section 4); and across children from different backgrounds (Section 5). Section 6 considers policy responses at different stages of the economic process. The Appendix provides additional materials on each of these topics."
Harvard University; Center for Economic and Policy Research (Washington, D.C.); National Bureau of Economic Research
Stantcheva, Stefanie
2021-04-13
