A Vicious Cycle: How Pandemics Lead to Economic Despair and Social Unrest

IMF Working Papers, October 16, 2020

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Canonical URL: A Vicious Cycle: How Pandemics Lead to Economic Despair and Social Unrest

Past major pandemics, even though much smaller in scale than COVID-19, have led to a significant increase in social unrest by reducing output and increasing inequality.
Higher social unrest is associated with lower output and higher inequality, indicating a vicious cycle between pandemics, economic performance, inequality, and social unrest.
The paper's results suggest that without policy measures, the COVID-19 pandemic will likely increase inequality, trigger social unrest, and lower future output in the years to come.

Empirical framework: panel VAR model / panel vector autoregressions; vector autoregression techniques are central to the analysis.
Key empirical constructs: pandemic dummy; pandemic event; disorder score; net Gini coefficient.

Implicit policy message: Proactive policy measures are needed to break the identified vicious cycle; absent such measures, pandemics (including COVID-19) can worsen inequality, elevate social unrest, and depress future output.

Subjects: Communicable diseases, COVID-19, Econometric analysis, Health, Income distribution, Income inequality, National accounts, Personal income, Vector autoregression
Keywords: Communicable diseases, Covid-19, disorder score, Global, Income inequality, Inequality, net Gini coefficient, pandemic dummy, pandemic event, Pandemics, panel VAR model, panel vector autoregressions, Social Unrest, Vector autoregression, WP