Covid Economics - Issue 73

This paper analyses the economic effects of the COVID sanitary situation and non-pharmaceutical interventions (NPIs) on 29 advanced OECD countries. We use mobility data as a proxy for economic activity and compare the first wave of COVID to the second one. Overall, our results show that NPIs were the main explanatory factor behind the mobility reduction in advanced OECD countries during the first wave. The sanitary situation played a more important role during the second wave suggesting (i) a greater awareness of the severity of the health situation and/or (ii) an increase in individual responsibility, which was given more room as restrictions were less severe during the second wave. Focusing on 6 European countries in particular, we observe that those most affected during the first wave display higher elasticities to mobility restrictions, except for Italy where restrictions and the sanitary situation had similar impacts on mobility. Looking at the relative effects of different types of NPIs we see that more stringent measures had more impact on mobility. Nevertheless, we remain cautious regarding these last estimates as the rapid sequencing of NPIs likely implies issues of statistical identification.

A much debated issue in the COVID-19 state aid to firms is the extent to which these measures keep non-viable firms afloat. What are the characteristics of firms that receive aid and are they viable in the long term? Based on a survey of 1151 firms in the Netherlands, we find that on average, government support goes to better-managed firms and to those with low turnover expectations and high turnover uncertainty. This suggests that COVID-19 state aid tends to go to firms that are most in need of it now and are more likely to be viable in the long term.

The cross-country relationship between Covid-19 crude mortality rates and previously measured income inequality and poverty in the pandemic’s first wave is studied, controlling for other underlying factors, in a sample of 141 countries.  An older population, fewer hospital beds, lack of universal BCG (tuberculosis) vaccination, and greater urbanization are associated with higher mortality.  The death rate has a consistent strong positive relationship with the Gini coefficient for income.  Poverty as measured by the $1.90 per day standard has a small negative association with death rates.  The elasticity of Covid-19 deaths with respect to the Gini coefficient, evaluated at sample means, is 0.9.  Assuming the observed empirical relationships unchanged, if the Gini coefficient in all countries where it is above the OECD median was instead at that median, 67,900 fewer deaths would have been expected after 150 days of the pandemic - a reduction of 11%. Shrinking higher Gini’s down to the G7 median reduces predicted deaths by 89,900, or 14%.

This paper studies how the COVID-19 pandemic affected firms' investment decisions. Combining a survey of Swiss firms with a quasi-experimental research design finds that the pandemic caused firms to reduce their 2020 investment plans by over one-eighth. Firms in regions more exposed to the virus and industries more sensitive to government-imposed restrictions cut their investments more. Both financial constraints and increased uncertainty contributed to downward revisions, which concern investments to extend the production capacity above all. By contrast, the pandemic stimulated investments driven by technological factors or investments of innovative firms.

This paper finds empirical evidence that faster and smarter containment measures were associated with lower fiscal responses to the COVID-19 shock. We also find that initial conditions, such as fiscal space, income, health preparedness and budget transparency were important in shaping the amount and design of the COVID-19 fiscal response.

Stay-at-home policies due to the Covid-19 pandemic have drastically increased housework and childcare. During the lockdown, couples were harshly challenged by this novel situation which could notably redistribute roles and/or could also lead to intrahousehold conflicts. In this paper, we use individual data collected from an online survey on French partnered women during the confinement of the 2020 Spring to investigate the lockdown’s effects on the household chores allocation and tensions in the couple. We show that the lockdown did not offer an opportunity to strongly renegotiate the housework and childcare division between the partners, as women still did the lion’s share during this period. Men changed their participation in household chores that are quasi-leisure, such as shopping and playing with children. We also document that an unbalanced division of the increased household chores during the lockdown, in particular on cleaning and childcare, is directly linked to an increase of the intrahousehold conflicts. To conclude, this period did not structurally affect gender roles and stereotypes at home, despite minor intrahousehold changes.