During the pandemic, this page will post work and notes by INET Oxford researchers with data, analyses and views on the crisis in real time. Given the fast-moving nature of the crisis, posts will not be subject to the normally rigorous review of our usual publication; by necessity work will be updated, refined, and corrected as events unfold. But we hope the work will nonetheless contribute to broader efforts to understand and manage the crisis.
9 September 2020
Modelling COVID-19 Contagion: Risk Assessment and Targeted Mitigation Policies
In our new paper we use a spatial epidemic model with demographic and geographic heterogeneity to study the regional dynamics of COVID-19 across 133 regions in England.
Our model emphasises the role of variability of regional outcomes and heterogeneity across age groups and geographic locations, and provides a framework for assessing the impact of policies targeted towards sub-populations or regions. We define a concept of efficiency for comparative analysis of epidemic control policies and show targeted mitigation policies based on local monitoring to be more efficient than country-level or non-targeted measures. In particular, our results emphasise the importance of shielding vulnerable sub-populations and show that targeted policies based on local monitoring can considerably lower fatality forecasts and, in many cases, prevent the emergence of second waves which may occur under centralised policies.
1 September 2020
Supply and demand shocks in the COVID-19 pandemic: an industry and occupation perspective - Published in Oxford Review of Economic Policy, August 2020
We provide quantitative predictions of first-order supply and demand shocks for the US economy associated with the COVID-19 pandemic at the level of individual occupations and industries. To analyse the supply shock, we classify industries as essential or non-essential and construct a Remote Labour Index, which measures the ability of different occupations to work from home. Demand shocks are based on a study of the likely effect of a severe influenza epidemic developed by the US Congressional Budget Office. Compared to the pre-COVID period, these shocks would threaten around 20 per cent of the US economy’s GDP, jeopardize 23 per cent of jobs, and reduce total wage income by 16 per cent. At the industry level, sectors such as transport are likely to be output-constrained by demand shocks, while sectors relating to manufacturing, mining, and services are more likely to be constrained by supply shocks. Entertainment, restaurants, and tourism face large supply and demand shocks. At the occupation level, we show that high-wage occupations are relatively immune from adverse supply- and demand-side shocks, while low-wage occupations are much more vulnerable. We should emphasize that our results are only first-order shocks—we expect them to be substantially amplified by feedback effects in the production network.
Transatlantic excess mortality comparisons in the pandemic
Janine Aron and John Muellbauer assess in their new article: “Transatlantic excess mortality comparisons in the pandemic”, how to make valid comparisons of excess mortality between the U.S. and Europe during the pandemic. This focus was inspired by their recent work with Dr. Jessica McDonald of FactCheck.org on recent high-profile U.S. vs. Europe comparisons.
Building on their earlier primer on excess mortality in European countries, their preferred measure for comparing excess mortality is the P-score ratio (i.e. deaths above ‘normal’ and expressed as a percentage of ‘normal’ deaths). Aron and Muellbauer find that up to the most recently available week at the end of June, Europe experienced a 22 percent lower rate of excess mortality than the U.S.. This contradicts recent public claims that it was 33 percent higher. They use data from Our World in Data, the Human Mortality Database and the U.S. CDC. Given the later spread of the pandemic in much of the U.S., comprising over 60 percent of its population, the comparisons made later this year are likely to be even more unfavourable to the U.S.. The U.S. Northeast is the region most comparable with individual European countries in terms of timing of the pandemic, population density, age composition and urban structure. This region experienced a far higher rate of excess mortality during the peak weeks than the worst-affected countries in Europe. For example, compared with Spain, the Northeast region had 28 percent proportionately-worse excess mortality (i.e. a P-score of 76.2 percent versus 54.9 percent for Spain).
 Janine Aron and John Muellbauer are Senior Fellows of the Institute for New Economic Thinking at the Oxford Martin School and members of the Leverhulme Centre for Demographic Science, University of Oxford. We are grateful to Dr. Jessica McDonald of FactCheck.org for highlighting the current relevance of the issue and working with us. Her article can be found here: Trump Touts Misleading and Flawed Excess Mortality Statistic. We thank Our World in Data, especially Charlie Giattino, for providing much of the data.
COVID-19: an economic perspective
The Covid-19 Crisis Response Helps the Poor: The Distributional and Budgetary Consequences of the UK lock-down
Patryk Bronka, Diego Collado and Matteo Richiardi
In a new INET Oxford Working paper we nowcast the economic effects of the Covid-19 pandemic and related lock-down measures in the UK and then analyse the distributional and budgetary effects of the estimated individual income shocks, distinguishing between the effects of automatic stabilisers and those of the emergency policy responses. Under conservative assumptions about the exit strategy and recovery phase, we predict that the rescue package will increase the cost of the crisis for the public budget by an additional £26 billion, totalling over £60 billion. However, it will allow to contain the reduction in the average household disposable income to 1 percentage point, and will reduce poverty rate by 1.1 percentage points (at a constant poverty line), with respect to the pre-Covid situation. We also show that this progressive effect is due to the increased generosity of Universal Credit, which accounts for only 20% of the cost of the rescue package.
New ONS report on excess mortality comparisons out today
Important work by Prof. John Muellbauer and Dr. Janine Aron of INET Oxford & Nuffield College has been used in a new ONS report on excess mortality comparisons. The report is an analysis of all-cause mortality patterns of selected European countries and regions, week ending 3 January (Week 1) to week ending 12 June (Week 24) 2020. It draws on their work in several respects, especially in emphasising the publication of granular data and of P-scores, and the ONS has adopted their terminology for P-scores. The report confirms the conclusions from their earlier OWID paper: England had the highest cumulative excess mortality in Europe, though the peak weeks were worse in Spain. The age comparisons confirm that England’s relative record is particularly bad for the working age population.
Read the full report here.
The excess mortality papers can be found earlier in this blog and in the Publications section of this website. The work can also be found on the Our World in Data site, and summarised on VoxEU.
Janine Aron and John Muellbauer’s work on excess mortality was presented to the Federal Reserve Bank of Dallas in a seminar on the 28th July 2020. Texas is currently in the middle of a very serious spike of Covid-19 disease. The presentation drew on the authors’ recent paper.
The usefulness of the excess mortality statistics disaggregated by age, ethnicity, occupation, region and gender, for hypotheses and models of policy to address the pandemic, and to appropriately release lockdown measure were discussed. The presentation included a good deal of new material for the US context drawing on recent improvements in data provided by the US Centers for Disease Control and Prevention (CDC) database. Mortality differences between whites and ethnic minorities, seen in the UK, are very evident in the US, though there are systematic differences between states. Another striking similarity is in excess mortality among those of working age. In much of the rest of Europe, even where the ‘65+’ age group was heavily impacted, excess mortality among those of working age was far lower than in the US and the UK, particularly England. Relevant lessons from European comparisons, including on the experience of care homes, for interpreting the US pandemic experience were drawn. New research was discussed on possible trade-offs between economic activity and health policies. It was argued that granular data on excess mortality could and should be used to improve such research.
Oxford Supertracker: The Global Directory for COVID Policy Trackers and Surveys
Mary Daly, Bernhard Ebbinghaus, Lukas Lehner, Marek Naczyk, Tim Vlandas
The Oxford Supertracker is a global directory of over 100 policy trackers and surveys related to COVID-19. This novel collection is designed to assist researchers and policy-makers in keeping track of a rapidly growing number of data sources. You can search and identify relevant information resources, such as datasets, surveys, and systematic collections, across different areas, countries and data types. Within a few weeks, thousands of researchers from over 120 countries around the world have visited the initial website (mentioned in this blog, 22nd April) making use of the directory and contributing to the growing number of entries.
The Supertracker will be updated with input from policy-makers, researchers and users, to identify symmetries and gaps in existing trackers and propose concrete actions to address these.
These will be particularly relevant to the social policy and and economic inequality prevention measures, that are put in place as lockdown policies ease.
Visit the Supertracker website here.
We still don’t know if warmer weather slows down the spread of COVID-19
The arrival of summer in the Northern Hemisphere has caused increased interest, from both the research community and the public at large, about the possibility that warmer weather might slow the spread of COVID-19.
In a new analysis, forthcoming in Environmental and Resource Economics, researchers from the University of Oxford highlight key limitations of available epidemiological data, concluding that it is currently impossible to know whether more people contract COVID-19 in hot or cold weather.
"Our study found several problems with trying to understand the influence of weather using existing data on confirmed COVID-19 cases," explains Dr Cohen, study lead author and senior researcher at INET Oxford and Oxford’s Smith School of Enterprise and the Environment. "The existing data can’t reliably tell us whether warmer weather slows down the spread of COVID-19, as some earlier studies have tried to assess, so we urge both policy makers and the public to act with caution."
Do banks have enough capital for the COVID-19 crisis?
The COVID-19 induced ‘Great Lockdown’ has cast doubt on the efficacy of bank buffers in supporting the real economy in times of crisis. Despite accommodative regulatory and supervisory action, banks remain hesitant to draw on their buffers to maintain credit provision. Recognising the difficulty in judging the demand for credit in the midst of the COVID-19 crisis, this column for VoxEU focuses on the potential supply of credit and explores the obstacles to ‘usability’ of bank capital. It concludes that the current capital framework falls short: there is not enough ‘usable capital’, and the disincentives to actually draw it down are too strong. Finally, it recommends improvements in current capital framework to overcome these issues.
A pandemic primer on excess mortality statistics and their comparability across countries
INET Oxford's Janine Aron & John Muellbauer have published a new blog post with Charlie Giattino and Hannah Ritchie from Our World in Data looking at excess mortality statistics and their comparability across countries.
Summary: Excess mortality data avoid miscounting deaths from the under-reporting of Covid-19-related deaths and other health conditions left untreated. Excess mortality is defined as actual deaths from all causes, minus ‘normal’ deaths. This article assesses the comparability of data on excess mortality between countries and regions, it reviews the available data sources, and compares and contrasts different statistical measures of excess mortality. Now that the first wave of the pandemic is over for most European countries, the time has come for robust European comparisons. Our preferred measure of excess deaths relative to normal deaths, the more transparent and comparable P-score, is calculated for European countries with high rates of excess mortality during the Covid-19 pandemic. For the ‘all age’ group and especially for the working age group, ‘15-64’, England has had the highest rates of excess mortality. Spain had the highest cumulative P-score over the pandemic weeks for the ‘over 85’ age group. We address issues of international data and comparability on the extent of deaths among the care home residents. Generally, research is needed into divergent patterns of excess mortality between and within countries. Excess mortality measures can be compared in cross-tabulation and correlations controlling for common features like density by region, to propose policy hypotheses. Modellers should have ready access to transparent, comparable international data to a granular level to test such hypotheses to aid policy making for potential further waves of the pandemic. We suggest how international statistical agencies and national statistical agencies could publish improved measures of excess mortality.
The research was used in a BBC News article on 29th June by the Economics editor, Faisal Islam. Read the full BBC article here and listen to the findings described in detail on BBC Radio 4 News, 6pm 29th June (listen from 8min 17secs).
Faisal Islam penned another article using this research on 4th July, 'Coronavirus: What do global death patterns reveal about the UK?'. Read the full BBC article here.
New INET Oxford working paper - Five lessons from COVID-19 for advancing climate change mitigation
The nexus of COVID-19 and climate change has so far brought attention to short-term greenhouse gas (GHG) emissions reductions, public health responses and clean recovery stimulus packages. We take a more holistic approach, making five broad comparisons between the crises with five associated lessons for climate change mitigation policy. First, delay is costly. Second, policy design must overcome biases to human judgment. Third, inequality can be exacerbated without timely action. Fourth, global problems require multiple forms of international cooperation. Fifth, transparency of normative positions is needed to navigate value judgments at the science-policy interface. Learning from policy actions during the COVID-19 crisis could enhance efforts to reduce GHG emissions and prepare humanity for future crises.
Production networks and epidemic spreading: Re-opening the UK economy
Many governments are slowly unwinding their economies from nationwide lockdowns. However, re-opening the economy entails a serious trade-off between fostering economic output and keeping the spread of infection low. This column reports several re-opening scenarios for the UK economy, documenting their projected impacts on both GDP and the spread of the virus. The results suggest that it is best to re-open upstream industries first, as they provide a large direct and indirect economic boost at a relatively lower cost in terms of further epidemic spreading.
Wage inequality and poverty effects of lockdown and social distancing in Europe
Juan C. Palomino, Juan G. Rodrguez and Raquel Sebastin
The “social distancing” measures taken to contain the spread of COVID-19 impose economic costs that go beyond the contraction of GDP. Since different occupations are not equally affected, this supply shock may have distributional implications. Here, we evaluate the potential impact of enforced social distancing on wage inequality and poverty across Europe. We compute a Lockdown Working Ability (LWA) index which represents the capacity of individuals to work under a lockdown given their teleworking index −that we obtain for European occupations using 2018 EU-LFS− and whether their occupation is essential or closed. Combining our LWA index and 2018 EU-SILC, we calculate individuals’ potential wage losses under six scenarios of lockdown. The Lockdown Incidence Curves show striking differential wage losses across the distribution, and we consistently find that both poverty and wage inequality rise in all European countries. These changes increase with the duration of the lockdown and vary with the country under consideration. We estimate an increase in the headcount index of 3 percentage points for overall Europe, while the mean loss rate for the poor is 10.3%, using the 2 months lockdown simulation. In the same scenario, inequality measured by the Gini coefficient increases 2.2% in all Europe, but more than 4% in various countries. When we decompose overall inequality in Europe into between- and within-countries components, both elements significantly increase with the lockdown, being the change of the latter more important.
Production networks and epidemic spreading: How to restart the UK economy?
We analyse the economics and epidemiology of scenarios for a phased restart of the UK economy. The model analyses the impact of relaxing social distancing measures on potential GDP increases, employment, and the impact on the disease infection rate (R0). The model is constructed utilising detailed data on supply chains, industry sectors, and occupations, and takes into account both supply and demand constraints on sectors, as well as inventory dynamics and feedback between unemployment and consumption. The estimated epidemiological impacts take into account factors such as use of physical proximity by occupation, transport, and school openings. We investigate six dierent re-opening scenarios, presenting our best estimates for the increase in R0 and increase in GDP. Our results suggest that there is a reasonable compromise that yields a relatively small increase in R0 (but keeps R0 below 1) and delivers a substantial boost in economic output. This scenario corresponds to a situation in which all non-consumer facing industries reopen, schools are partially open only for workers who need childcare, and everyone who can work from home continues to work from home.
Measuring excess mortality: the case of England during the Covid-19 Pandemic
Analysing excess mortality - the count of deaths relative to what would normally have been expected - is highly relevant for policy-makers during a pandemic. The UK now has the highest recorded number of deaths in Europe attributed to Covid-19. The more robust data on excess mortality make even grimmer reading. These excess mortality data have the advantage that they can both overcome the problem of misdiagnosis or under-reporting of Covid-19-related deaths and pick up ‘collateral damage’ from other health conditions, untreated because the health system might have been overwhelmed by Covid cases. This article compares and analyses published excess mortality scores. EuroMOMO produces comparative tracking of excess mortality in Europe with the biggest coverage of countries. Of the 24 countries or regions covered, England had the highest peak weekly excess mortality in total, and also for the most vulnerable age group (the over-65s), and, strikingly, for the 15-64 age group. For the last group, which should be less at risk, the relative record for England is nearly 3 times worse than the next worst-ranked country, Spain (German data suggest mortality well within the normal range). While reasons for England’s divergent pattern are explored, more research is urgently needed.
A simple weekly measure of excess mortality is the P-score defined as the number of excess deaths divided by the number of ‘normal’ deaths, for example defined by the average for the corresponding week over the previous 5 years. Janine Aron and John Muellbauer argue that national statistical offices such as the UK’s ONS should be publishing weekly P-scores of excess mortalities for the constituent countries, regions, sub-regions, down to a local authority level to help understand the pandemic and inform policy. The more complex ‘Z-score’ measure published by EuroMOMO, is standardised by dividing excess deaths by the standard deviation of deaths to capture uncertainty around the weekly death count under normal conditions. However, if the weekly data variability is lower in one country compared to another, then the Z-score may overstate the apparent relative size of excess deaths. Comparisons with P-scores computed from raw data released by The Economist support the conclusion that England has the most serious incidence of excess mortality of the comparator countries or regions analysed by EuroMOMO. They argue that EuroMOMO should be allowed to publish P-scores as well as Z-scores to aid more systematic comparability across countries and guide epidemiological studies and social and economic policy.
Building back better: A net-zero emissions recovery
An analysis of possible COVID-19 economic recovery packages shows the potential for strong alignment between the economy and the environment. The direction of these measures over the next six months will largely determine whether the worst impacts of global warming can be avoided, and research published today reveals that climate-friendly policies can deliver a better result for the economy - and the environment.
A team of internationally-recognised experts, led by Cameron Hepburn at the University of Oxford, and including Nobel prize winner Joseph Stiglitz and well-known climate economist Nicholas Stern, came together to assess the economic and climate impact of taking a green route out of the crisis. They catalogued more than 700 stimulus policies into 25 broad groups, and conducted a global survey of 231 experts from 53 countries, including senior officials from finance ministries and central banks.
Drawing on this survey as well as learnings from the 2008 financial crisis, the economists found that green projects create more jobs, deliver higher short-term returns per dollar spend and lead to increased long-term cost savings, by comparison with traditional fiscal stimulus.
The 'COP26 Universities Network' has drawn on this research and other analyses to create a briefing for policymakers outlining a path to net-zero emissions economic recovery from COVID-19. The network, a growing group of more than 30 UK-based universities, was formed to help deliver climate change outcomes at the UN Climate Summit in Glasgow and beyond.
They have put together a briefing which identifies ten fiscal recovery policies that promise to bring both short-term high economic impact and long-term structural change to ensure the UK meets its 2050 climate goals.
Among the policies emphasised are: renewable energy, reducing industrial emissions through carbon capture and storage, investment in broadband internet to increase coverage, electric vehicles and nature-based solutions. The briefing further called for the Cabinet Committee on Climate Change to be renamed the Climate Change Emergency Committee to reflect the urgent need for action.
“Exiting and Learning from the Pandemic” - OECD Virtual Seminar with Michael Spence and Eric Beinhocker
The OECD’s New Approaches to Economic Challenges (NAEC) initiative convened a virtual seminar with Nobel laureate Michael Spence and INET Oxford Executive Director Eric Beinhocker on “Exiting and Learning from the COVID-19 Pandemic”. The event, which included OECD ambassadors and staff, was an opportunity to discuss the latest thinking on the likely trajectory of the crisis, paths to safely opening up economies, and longer-term implications. Spence discussed the danger the crisis presented to firm, household, and financial sector balance sheets and the potential for deep and long-term destruction of productive economic capacity. He emphasised that extraordinary policy responses were required to preserve balance sheets and may be required for longer than many expect. Beinhocker also noted that the exit path was likely to be significantly longer and bumpier than many policymakers and financial markets seem to be expecting, but offered a hopeful note that the longer-term lessons learned from the crisis might help us “build back better”.
Watch a video of “Exiting and Learning from the Pandemic” here.
See Beinhocker’s slides here.
Testimony by Eric Beinhocker to U.S. Congressional hearing on National Paycheck Guarantee
INET Oxford Executive Director Eric Beinhocker provided testimony in a virtual hearing of the Congressional Progressive Caucus in the U.S. House of Representatives. The hearing, co-chaired by Rep. Pramila Jayapal and Rep. Mark Pocan, was convened to discuss proposals for a next round of economic stimulus to fight the COVID-19 crisis. Beinhocker spoke in support of the “National Paycheck Guarantee Act” which would see the Federal government guarantee employer payrolls during the crisis to ensure that workers are able to stay in their jobs, paychecks continue to flow, and healthcare insurance remains in place until the economy is able to re-open. Beinhocker noted that several other countries such as the UK, Denmark, Ireland, and Germany have implemented such guarantees and have succeeded in preventing unemployment skyrocketing to the levels seen in the U.S. with over 30 million people losing their jobs in the past weeks. Beinhocker also discussed the potential costs and likely benefits of such a program.
Watch a video of the hearing here. Beinhocker’s testimony starts at 24:50
22 April 2020
A tracker of trackers: COVID-19 policy responses and data
Researchers across the globe are producing impressive data and research on the health, economic, social, and political responses to the COVID crisis. In order to help policymakers, academics, and citizens find and navigate this data, Lukas Lehner has set up a "tracker of trackers" on policy responses and data relating to the crisis.
The collection is structured around the areas of:
- 1. Confinement, Travel, Civic Freedom, Prisons
- 2. Macro, Financial and Tax Policy
- 3. Social and Employment Policy
- 4. Health and Care Policy
- 5. Education, Research and Innovation
- 6. Regions, Cities, SMEs, Tourism, Philanthropy
- 7. Public Attitudes and Behavioural Responses
- 8. Media coverage, Elections and Policy Making
- 9. Additional Sources
A Workable Strategy for Covid-19 Testing: Stratified Periodic Testing rather than Universal Random Testing - Published in CEPR COVID Economics
Matthew Cleevely, Daniel Susskind, David Vines, Louis Vines, Sam Wills
This paper argues for the regular testing of members of at-risk groups more likely to be exposed to SARS-CoV-2 as a strategy for reducing the spread of Covid-19 and enabling the resumption of economic activity. We call this ‘stratified periodic testing’. It is ‘stratified’ as it is based on at-risk groups, and ‘periodic’ as everyone in the group is tested at regular intervals. We argue that this is a better use of scarce testing resources than ‘universal random testing’, as recently proposed by Paul Romer. We find that universal testing would require checking over 21 percent of the population every day to reduce the effective reproduction number of the epidemic, R’, down to 0.75 (as opposed to 7 percent as argued by Romer). We obtain this rate of testing using a corrected method for calculating the impact of an infectious person on others, where testing and isolation takes place, and where there is self-isolation of symptomatic cases. We also find that any delay between testing and the result being known significantly increases the effective reproduction number and that one day’s delay is equivalent to having a test that is 30 percent less accurate.
COVID and the Economy: A Complexity Modelling Approach - SFI Video Seminar with J. Doyne Farmer
Social distancing measures in response to the COVID-19 pandemic constitute a unique natural experiment, in which we are shutting major parts of the economy down, hoping that we can restart it later. Can we predict what will happen?
In this video seminar from the Santa Fe Institute, INET Oxford’s Doyne Farmer discusses the group’s work to model the shocks to the economy caused by the social distancing measures necessitated by the health crisis. Over the long term, the COVID-19 pandemic underlines the need for complexity economics models that contain more realism. A good starting point would be an accurate model for the dynamics of supply chains. We have begun an effort to do this at the firm level. Farmer presents a vision of how we can gather the data and develop the necessary models, and discuss how this would be valuable for solving not just COVID-19, but also many of the economic challenges we are likely to face in the future.
These SFI ACtioN conversations are usually by invitation and typically follow Chatham House rules, but due to the importance of the topic, SFI and the speaker are making the talk publicly available.
Watch the full video here.
Read the paper discussed here.
20 April 2020
Nowcasting COVID Hospital Deaths in Real-Time
Bent Nielsen and Sheila Bird (Cambridge, MRC Biostatistics Unit)
In a crisis moving as rapidly as COVID-19 it is important for policymakers and health responders to have as current information as possible. Unfortunately data collection and reporting delays make this difficult. Bent Nielsen of Nuffield College and Sheila Bird (OBE FRSE) of the University of Cambridge’s Biostatistics Unit have produced a “now-cast” of COVID-19 deaths in English hospitals to provide a real-time snapshot of where we are in the pandemic and help answer questions such as whether deaths are beginning to peak or not. The now-casts also include regional data.
Access the now-casts here.
18 April 2020
The COVID-19 Pandemic: Government vs. Community Action Across the United States - Published in CEPR COVID Economics
Adam Brzezinski, Guido Deiana, Valentin Kecht, David Van Dijcke
Using data from 40 million smartphone devices across the US, we show that state- and county-level "lock-down" policies in response to the COVID-19 pandemic can increase average time spent at home by as much as 39%, or 4.7 hours per day. Even when no lock-down policies are implemented, we find that people voluntarily engage in limited physical distancing, once the virus takes hold in their area. However, the less people engage in physical distancing by themselves, the more likely it is that governments end up introducing compulsory measures to that effect. We also show that individuals' response to such measures differs by household income level, political alignment, trust in science, degree of urbanization and education level. Lastly, we show that county-level policies have stronger effects when no state-level policies are in place yet.
17 April 2020
Supply and demand shocks in the COVID-19 pandemic: An industry and occupation perspective - Published in CEPR COVID Economics
We provide quantitative predictions of first-order supply and demand shocks for the US economy associated with the COVID-19 pandemic at the level of individual occupations and industries. To analyze the supply shock, we classify industries as essential or non-essential and construct a Remote Labor Index, which measures the ability of different occupations to work from home. Demand shocks are based on a study of the likely effect of a severe influenza epidemic developed by the US Congressional Budget Office. Compared to the pre-COVID period, these shocks would threaten around 22% of the US economy's GDP, jeopardise 24% of jobs and reduce total wage income by 17%. At the industry level, sectors such as transport are likely to have output constrained by demand shocks, while sectors relating to manufacturing, mining and services are more likely to be constrained by supply shocks. Entertainment, restaurants and tourism face large supply and demand shocks. At the occupation level, we show that high-wage occupations are relatively immune from adverse supply and demandside shocks, while low-wage occupations are much more vulnerable. We should emphasize that our results are only first-order shocks – we expect them to be substantially amplified by feedback effects in the production network.
14 April 2020
George Soros and Eric Beinhocker, “Guarantee Worker Paychecks” - Op Ed in the LA Times
The philanthropist and INET founder George Soros, and INET Oxford Executive Director Eric Beinhocker, published an op-ed in the LA Times calling for the U.S. federal government to do more to help workers and companies affected by the COVID crisis. Specifically, building off of INET Oxford’s academic work on the subject, they call for the government to immediately guarantee the paychecks of all workers to put a brake on the catastrophic collapse in employment underway. They argue that it is critical for workers to stay in employment, even if temporarily idled by the crisis, in order to keep incomes flowing, healthcare coverage in place, and to enable a fast re-start of the economy once the crisis passes. Such guarantees have been enacted by a number of countries and the concept has been endorsed by Democratic Rep. Pramila Jayapal, chair of the Congressional Progressive Caucus, and Republican Senator Josh Hawley. As Soros and Beinhocker put it, “as long as Americans are required to ’shelter in place’ we must help them to ’shelter in job.’”
The Op-Ed by George Soros & Eric Beinhocker may be accessed here.
Estimates of Costs for a U.S. Paycheck Guarantee
This paper and model provide an initial estimate of the potential fiscal costs of enacting a paycheck guarantee in the U.S. similar to programs enacted in other major economies. The estimate is that a program guaranteeing worker paychecks up to an annual salary of $100,000 plus health benefits would potentially cost $115.7 billion per month or $347 billion for a 3-month program. The costs could vary significantly depending on a number of assumptions and scenarios. The paper concludes that the benefits of such a program in preserving employment are likely to far outweigh the fiscal costs.
11 April 2020
The coronavirus pandemic and US consumption - published in VoxEU
The coronavirus pandemic has triggered unprecedented shocks to both supply and demand, raising important questions about the impact on US consumer spending. In the US, consumption comprised as much as 70% of GDP in 2019. Typically, consumption is less volatile than income. But as this column argues, it is now likely to fall even more than household income. One reason is that part of the negative shock originates in disruption to consumption itself. Another comes from the jump in income insecurity as reflected in an unprecedented rise in the unemployment rate. Other reasons include the fall in asset prices and a sharp contraction in credit availability. A plausible scenario from the analysis suggests that US real consumer spending in the second quarter of 2020 could fall by around 20%, if household labour income falls by 16%.
Forecasting the future path of the pandemic
David Hendry, Jennifer Castle, Jurgen Doornik
In a letter to The Financial Times, published on Saturday 11 April (available here for subscribers), we raised the issue of forecasting the future path of the pandemic. Predictions for the total number of Covid-19 deaths in the UK have ranged from 6,000 to 20,000 to about 66,000, revealing that forecasts from epidemiologists' models are as diverse in their outcomes as economists' from theirs. Just as economists did not foresee the financial crisis and certainly had no inkling last year of the present massive downturn, epidemiologists did not predict that a pandemic of this scale would happen now: sudden highly adverse events are rarely foreseen, and always crying `wolf' is less than helpful. Moreover, how the pandemic develops is not merely by passively evolving in an isolated population, but is influenced by government policies and individual behaviour, both of which are very uncertain and change over time, where some decisions are accompanied by large economic and health costs. Adding in some maverick leaders creates a potent mix of uncertainty.
Nevertheless, we argue that notwithstanding all these difficulties and uncertainties, scientific efforts are far from useless: on the contrary, we believe there is an even greater need for both modelling and forecasting. It is better to drive with fogged-up glasses than blindfolded. To quote Henri Poincaré `It is far better to foresee even without certainty than not to foresee at all.' (The Foundations of Science, 1913). Later we and others can try to discover which fogged-up glasses were better than others, to guide future choices: such learning by experimenting is how science progresses. Data collection, through random testing and observation are consequently essential. The limitations of such research, both its underlying assumptions and fragility to other unforeseen events must be understood, and the real-time evaluations of the forecasts on our public website check how accurate they have been over time and across many countries at different stages of response. Our short-term forecasts require few assumptions, and so complement the longer term epidemiological models. By making real-time forecasts, these are not improved by any knowledge acquired after the event, but such knowledge can influence the formulation of later forecasting models.
6 April 2020
Expanding the US Stimulus to Guarantee Worker Paychecks
The $2 trillion US stimulus package (the CARES Act) signed into law on March 27 included significant support for the health sector, businesses, and unemployment benefits for workers. However, the Act critically failed to include direct support for employee paychecks to keep workers in employment during the crisis, other than for workers employed by small businesses (under 500 employees). This means that approximately 92 million of America’s 152 million workers do not have government backing of their paychecks and remain at significant risk of layoffs during the crisis. Other countries, including the UK, Germany, France, Denmark, Netherlands, and Australia, have provided various levels of government guarantees for all payrolls in their economies. Such guarantees are essential for minimizing a rapid collapse in employment, which appears to be already underway in the U.S. This updated 4-page briefing note outlines how the CARES Act might be expanded to include an economy-wide “American Paycheck Guarantee”. As support to keep workers in employment prevents and offsets the need for unemployment payments, such a guarantee could be implemented for little net fiscal cost in the near-term, and would likely result in major economic and fiscal savings in the medium term by reducing the depth of collapse and enabling a faster recovery.
1 April 2020
We need an ‘emergency survey’ based on random samples. Urgently.
During times of massive socio-economic change, it should be possible to quickly launch an emergency survey among a random sample of the population, with a panel that is followed over an extended period of time. In the current crisis, this sample should also be used to collect information on the incidence and distribution of COVID-19, to complement biased information from testing only very specific subpopulations. Such an emergency survey should allow to make much better informed policy decisions, including on targeted health interventions, uncovered needs in the population, and cushioning negative effects of current health measures, as well as on when to lift restrictions on fundamental freedoms, and how to jumpstart economic activity, once the health situation is back under control.
25 March 2020
A Complex Systems Take on the Economics of COVID-19
In this post Marco Pangallo of the Sant’Ann School for Advanced Studies in Pisa, Italy and an Associate Fellow at INET Oxford, provides an analysis of the COVID-19 economic crisis from a complex systems perspective. He argues that traditional equilibrium models cannot provide necessary insights into the key dynamics of the crisis, in particular the interplay between the public health dynamics and the economic dynamics. Agent-based models, similar to those developed by epidemiologists to guide the public health response, are urgently needed to capture the heterogeneity, network effects, and dynamics of the system to help guide policymakers in the economic response.
Read Marco's post in full here.
24 March 2020
Q&A for a National Payroll Guarantee
Supplementing his 23 March memo arguing for a U.S. national Payroll Guarantee as a key response to the COVID-19 crisis, Eric Beinhocker has posted a Q&A sheet answering key questions about the proposal.
23 March 2020
The U.S. and Other Major Economies Should Immediately Implement National Payroll Guarantees
In this 2-page briefing note for U.S. policymakers, Eric Beinhocker makes the case for the U.S. to immediately follow the UK, France, and other European countries who have announced government nation-wide guarantees for the payrolls for all firms (large, small, profit, non-profit). This is an essential and urgent step towards limiting a catastrophic collapse in employment and incomes that has already begun in many countries. If workers can be kept in employment and incomes flowing during the lockdowns, there is a chance for a relatively rapid recovery once the public health crisis ends. But if businesses rapidly shed workers, even with significantly increased unemployment compensation or a temporary UBI, the large and rapid drop in incomes will lead to a downward spiral of collapsing demand and production, and huge frictional costs in re-starting the economy—an extended and deep depression will become likely. Other policies such as central bank interventions, business loans, or tax cuts are too slow and indirect to prevent such a collapse, only an immediate and blanket guarantee of payrolls will be fast enough.
Daily Short-Term Forecasts of COVD-19 Cases and Deaths Using Machine Learning
The Economic Modelling team (EMoD) at INET Oxford is producing daily short-term (1 week) time-series forecasts of COVD-19 cases and deaths for a number of countries using autometric (i.e. machine learning) extrapolations from data on actual cases and deaths. This is a different methodology than the epidemiological models used to make medium and long-term forecasts. In a crisis with such high uncertainty and limited data it is useful to utilise multiple methods to make forecasts and compare results. Such high-frequency short-term forecasts may be useful to policymakers planning responses and healthcare workers planning capacity needs.
COVID-19 Data Dashboard Produced by Our World in Data
The Our World in Data Team have aggregated a large amount of COVID-19 data from a variety of sources and produced a comprehensive and highly usable set of pages providing a dashboard of statistics and graphs. The pages provide a resource for policymakers, academics, and journalists, as well as individuals.