Covid Economics - Issue 75

In response to the COVID-19 crisis, governments worldwide have been formulating and implementing different strategies to mitigate its social and economic impacts. We study the household consumption responses to Japan's COVID-19 unconditional cash transfer program. Owing to frequent delays in local governments' administrative procedures, the timing of the payment to households varied unexpectedly. Using this natural experiment, we analyze households' consumption responses to cash transfers using high-frequency data from personal finance management software that links detailed information on expenditure, income, and wealth. We construct three consumption measures: one captures the baseline marginal propensity to consume (MPC), and the other two are for the lower and the upper bound of MPC. Additionally, we explore heterogeneity in MPCs by household income, wealth, and population characteristics, as well as consumption categories. Our results show that households exhibit immediate and non-negligible positive responses in household expenditure. There is significant heterogeneity depending on various household characteristics, with liquidity constraint status being the most crucial factor, in line with the standard consumption theory. Additionally, this study provides policymakers with insights regarding targeted cash transfer programs, conditioning on labor income, and liquidity constraints.

This paper investigates whether international exposure played a role in how companies were impacted and which strategies they used in response to the COVID-19 crisis. Our conceptual framework generates two testable hypotheses. First, international firms are more likely to be affected, both through demand and supply channels, than domestic firms due to their exposure to domestic and foreign lockdowns. Second, despite higher exposure, we expect international firms to be more resilient to the crisis than domestic firms. The resilience of international firms stems from their connectivity and productivity. Our empirical analysis corroborates both sets of hypotheses. The tests are based on a unique firm-level data set covering 4,433 enterprises in 133 countries, collected by the International Trade Centre under the COVID-19 Business Impact Survey. At the policy level, the results underscore the importance of global connectedness and international trade for promoting resilience to external shocks.

Using survey data collected in November 2020 from a representative sample of Italian working women, we analyze the effects of the second wave of COVID-19 on working arrangements, housework and childcare. By comparing our results to findings from similar data collected in April 2020 on the same sample, we explore whether and how the intra-family allocation of work and household duties changed since the first wave of the pandemic. We find that the increased gender gap in the household division of labor during the first wave of COVID-19 pandemic persisted during the second wave. We show that the brunt of domestic chores and childcare remains on women even after accounting for different working arrangements. In fact, the amount of time women spend on housework, childcare, and home schooling is unaffected by their partners’ working arrangements. By contrast, men contribute fewer hours to housework and home schooling when their partners are at home. Even when working-from-home and/or non-working men devote more hours to domestic activities, the additional time spent at home does not seem to lead to a reallocation of couples’ roles in housework and childcare. Our empirical results also show that educational attainment plays a role and that women with higher levels of education express less concern about potential loss of earnings or pension coverage.

We derive an analytic expression describing how health costs and death counts of the Covid-19 pandemic change over time as vaccination proceeds. Meanwhile, the disease may continue to spread exponentially unless checked by Non Pharmacological Interventions (NPI). The key factors are that the mortality risk from a Covid-19 infection increases exponentially with age and that the sizes of age cohorts decrease linearly at the top of the population pyramid. Taking these factors into account, we derive an expression for a critical threshold, which determines the minimal speed a vaccination campaign needs to have in order to be able to keep fatalities from rising. Younger countries with fast vaccination campaigns find it substantially easier to reach this threshold than countries with aged population and slower vaccination. We find that for EU countries it will take some time to reach this threshold, given that the new, now dominant, mutations, have a significantly higher infection rate. The urgency of accelerating vaccination is increased by early evidence that the new strains also have a higher mortality risk. We also find that protecting the over 60 years old, which constitute one quarter of the EU population, would reduce the loss of live by 95 percent.