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The Real-Time Consequences of COVID: Finding Balance in the Crisis

Francesco Grigoli and Damiano Sandri

October 8, 2020

One of the lasting lessons from the COVID-19 pandemic is that a lasting economic recovery will necessarily require resolving the health crisis.

Our study presented in the latest edition of the World Economic Outlook shows that the lockdowns decided by the public authorities, while having achieved the objective of reducing contamination, strongly contributed to the recession and had disproportionate effects on vulnerable groups , like women and young people. However, a large part of the recession was also due to people who voluntarily refrained from social interactions for fear of contagion. Lifting lockdowns is therefore unlikely to provide a decisive and lasting boost to the economy if contamination remains high, as voluntary physical distancing seems set to persist.

Yet the analysis concludes that it is possible to reconcile protecting public health with preventing prolonged economic decline. While containment has short-term costs, it can lead to a faster economic recovery because it reduces contamination, and therefore the extent of physical distancing chosen. It will be important to conduct research on the medium-term effects of containments and the robustness of our findings as the pandemic evolves and the body of available data expands.

The economic and health crisis through the prism of real-time data

We analyze the economic effects of lockdowns and voluntary physical distancing using two common variables representative of economic activity: Google mobility data and job postings posted on the Indeed website. As shown in the first graph below, out of the entire sample of 128 countries covered in the analysis, confinements and voluntary physical distancing contributed equally to the drop in mobility during the first three months. of the epidemic in a country. The contribution of voluntary physical distancing has been greatest in advanced countries, where individuals find it easier to telecommute or can even afford to stop working thanks to their savings and social security benefits. In low-income countries, on the other hand, individuals rarely have the option of choosing physical distancing because they cannot afford a temporary loss of income. The analysis of data relating to job vacancies provides similar insights; it shows that confinements and voluntary physical distancing have greatly contributed to the drop in demand for labor.

The strong contribution of voluntary physical distancing to the decline in mobility and job offers must warn managers against lifting the confinement when contamination is still high in the hope of a rapid start to activity. economic. Controlling health risks appears to be a prerequisite for a vigorous and lasting economic recovery.

In this regard, the analysis reveals that containment can significantly reduce contamination. The effects are particularly noticeable if they start early in the epidemic. The second graph shows that the epidemiological evolution has been significantly better in the countries which declared containment when the cases of COVID-19 were still low than in those which intervened when the cases were already numerous. The chapter also shows that containment must be strict enough to curb contamination, suggesting that strict and short-term containment may be preferable to more flexible and prolonged measures.

The effectiveness of containment in terms of reducing contamination, combined with the observation that contamination can significantly harm economic activity due to voluntary physical distancing, calls for reconsidering the dominant discourse on containment involving a trade-off between saving lives. and support the economy. Indeed, framing the problem in these terms ignores the fact that effective containment measures taken at the start of an epidemic can promote faster economic recovery by containing the virus and reducing voluntary physical distancing. These medium-term gains can offset the short-term costs of containment, and even have positive overall effects on the economy. This important aspect deserves further research as the pandemic evolves and the body of available data expands.

Consequences of confinement on vulnerable groups

The chapter also contributes to the growing body of evidence that the crisis is having a disproportionate impact on the most vulnerable groups. Mobility data reported by telecommunications company Vodafone for Spain, Italy and Portugal shows that the order for the population to stay at home and the associated school closures have further reduced mobility of women than of men. This effect is largely the result of the disproportionate burden borne by women in caring for children, which can prevent them from going to work and thereby jeopardize their professional prospects.

Vodafone data also shows that in general, confinement has a stronger impact on the mobility of young people. The last graph shows that orders given to the population to stay at home have led to a greater decline in the mobility of individuals aged 18 to 24 and 25 to 44, who tend to have young children who need to be taken care of. occupy when schools are closed and who often have temporary work contracts, more vulnerable to termination in the event of a crisis. This stronger effect on these populations threatens to increase intergenerational inequalities.

Targeted interventions – such as strengthening unemployment benefits and supporting paid leave for parents – are therefore necessary to protect the most vulnerable individuals and prevent the crisis from leading to a lasting increase in inequalities.


Francesco Grigoli is an economist in the International Economic Studies Division of the IMF’s Research Department. He previously worked in the Departments of Public Finance and Western Hemisphere, and at Columbia University as a visiting scholar. His research focuses on real-time macroeconomic policy and its effectiveness, the dynamics of consumption and savings, expectations, uncertainty, income inequality and the efficiency of spending.

Damiano Sandri is Deputy Head of the Global Economic Studies Division of the IMF’s Research Department. Previously, he was Senior Economist in charge of Brazil and participated in various IMF missions to European countries. His articles have appeared in leading academic journals and various IMF publications. He is a researcher at CEPR and associate editor of IMF Economic Review. He holds a doctorate in economics from Johns Hopkins University.

EDITOR’S NOTE: This article is a translation. Apologies should the grammar and / or sentence structure not be perfect.

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