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COVID-19 outbreak, social response, and early economic effects: a global VAR analysis of cross-country interdependencies

Authors
  • Milani, Fabio1
  • 1 University of California,
Type
Published Article
Journal
Journal of Population Economics
Publisher
Springer Berlin Heidelberg
Publication Date
Aug 19, 2020
Pages
1–30
Identifiers
DOI: 10.1007/s00148-020-00792-4
PMID: 32839640
PMCID: PMC7437387
Source
PubMed Central
Keywords
Disciplines
  • Original Paper
License
Unknown

Abstract

This paper studies the social and economic responses to the COVID-19 pandemic in a large sample of countries. I stress, in particular, the importance of countries’ interconnections to understand the spread of the virus. I estimate a global VAR model and exploit a dataset on existing social connections across country borders. I show that social networks help explain not only the spread of the disease but also cross-country spillovers in perceptions about coronavirus risk and in social distancing behavior. In the early phases of the pandemic, perceptions of coronavirus risk in most countries are affected by pandemic shocks originating in Italy. Later, the USA, Spain, and the UK play sizable roles. Social distancing responses to domestic and global health shocks are heterogeneous; however, they almost always exhibit delays and sluggish adjustments. Unemployment responses vary widely across countries. Unemployment is particularly responsive to health shocks in the USA and Spain, while unemployment fluctuFations are attenuated almost everywhere else.

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