COVID’s Impact in Real Time: Finding Balance Amid the Crisis
By Francesco Grigoli &
Damiano Sandri
Francesco Grigoli and Damiano
Sandri are economists at
the International Monetary
Fund (IMF)*
WASHINGTON DC, Oct. 12,
2020 (IPS) – One enduring lesson
from the COVID-19 pandemic
is that any lasting economic
recovery will depend on
resolving the health crisis.
Our research in the latest
World Economic Outlook
shows that government lockdowns
— while succeeding in
their intended goal of lowering
infections — contributed
considerably to the recession
and had disproportional effects
on vulnerable groups, such as
women and young people.
But the recession was also
largely driven by people voluntarily
refraining from social
interactions as they feared contracting
the virus. Therefore,
lifting lockdowns is unlikely to
lead to a decisive and sustained
economic boost if infections
are still elevated, as voluntary
social distancing will likely persist
.Yet the analysis finds that a
balance can be achieved in protecting
public health while preventing
a protracted economic
decline. Lockdowns impose
short-term costs but may lead
to a faster economic recovery
as they lower infections and
thus the extent of voluntary
social distancing.
Examining the mediumterm
effects of lockdowns as
well as the robustness of our
findings is an important area
for future research as the pandemic
evolves and more data
become available.
The economic and health
crisis through the lens of realtime
data
We analyze the economic
effects of lockdowns and voluntary
Contributing Writers: Azad Ali, Tangerine Clarke,
George Alleyne, Nelson King,
Vinette K. Pryce, Bert Wilkinson
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social distancing using
two high-frequency proxies
for economic activity: mobility
data from Google and job
openings posted on the website
Indeed.
As illustrated in the top chart
below, over the entire sample of
128 countries used in the analysis,
lockdowns and voluntary
social distancing contributed
equally to the drop in mobility
during the first 3 months of a
country’s epidemic.
The contribution of voluntary
social distancing was
larger in advanced economies
where people can work from
home more easily or can even
afford to stop working thanks
to personal savings and social
security benefits.
Conversely, people in lowincome
countries are often
unable to opt for voluntary
social distancing as they do
not have the financial means to
cope with a temporary income
loss. The analysis of job posting
data provides similar insights,
showing that both lockdowns
and voluntary social distancing
contributed substantially
to the drop in labor demand.
The large contribution of
voluntary social distancing in
reducing mobility and job postings
should warn policymakers
against lifting lockdowns when
infections are still elevated in
the hope of jumpstarting economic
activity. Addressing the
health risks appears to be a
pre-condition to allow for a
strong and sustained economic
recovery.
In this regard, the analysis
reveals that lockdowns can
substantially reduce infections.
The effects are particularly
strong if lockdowns are
adopted early in a country’s
epidemic.
The bottom chart below
shows that countries that
adopted lockdowns when
COVID-19 cases were still low
experienced much better epidemiological
outcomes relative to
countries that intervened when
cases were already high. The
chapter also documents that
lockdowns must be sufficiently
strict to curb infections, thus
suggesting that stringent and
short-lived lockdowns could
be preferable to mild and prolonged
measures.
The effectiveness of lockdowns
in reducing infections,
coupled with the finding
that infections can considerably
harm economic activity
because of voluntary social distancing,
calls for re-considering
the prevailing narrative
about lockdowns involving a
trade-off between saving lives
and supporting the economy.
This characterization of lives
vs. livelihoods neglects that
effective lockdown measures
taken early during an epidemic
may lead to a faster economic
recovery by containing the
virus and reducing voluntary
social distancing.
These medium-term gains
may offset the short-term
costs of lockdowns, possibly
even leading to positive overall
effects on the economy. More
research is warranted on this
important aspect as the crisis
evolves and more data become
available.
The impact of lockdowns on
vulnerable groups
The chapter also contributes
to the growing evidence that
the crisis is having disproportionate
effects on more vulnerable
groups. Anonymized and
aggregated mobility data provided
by telecommunications
company Vodafone for Italy,
Portugal, and Spain, show that
stay-at-home orders and the
associated school closures led
to a larger drop in the mobility
of women relative to men.
This effect is largely due
to the disproportionate burden
that women face in caring
for children, which may
prevent them from going to
work, thus jeopardizing their
employment opportunities.
The Vodafone data also
reveal that lockdowns tend to
impact the mobility of younger
people more strongly. The bottom
chart below shows that
stay-at-home orders led to a
sharper decline in the mobility
of people aged 18 to 24
and 25 to 44 who tend to have
younger children to care for
when schools are closed and
often have temporary job contracts
that are more likely to
be terminated during a crisis.
The larger impact on these
populations threatens to
increase inter-generational
inequality.
Targeted policy intervention—
such as strengthening
unemployment benefits and
supporting paid leave for parents—
is thus needed to protect
more vulnerable people
and ensure that the crisis does
not lead to a long-lasting widening
of inequality.
Source: IMF Blog
*IMF Blog is a forum for
the views of the International
Monetary Fund (IMF) staff
and officials on pressing economic
and policy issues of
the day.
The views expressed are
those of the author(s) and do
not necessarily represent the
views of the IMF and its Executive
Board.
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COVID-19: UNESCO- Solutions for Distance LearningThe contribution of voluntary social
distancing was larger in advanced economies where people can work from home more
easily or can even afford to stop working thanks to personal savings and social security
benefi ts.
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