Loss-of-Learning and the Post-Covid Recovery in Low-Income Countries

IMF Working Papers, February 4, 2022

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Canonical URL: Loss-of-Learning and the Post-Covid Recovery in Low-Income Countries

Authors: Edward F Buffie, Christopher S Adam, Luis-Felipe Zanna, Kangni R Kpodar
Published: February 4, 2022
Series: IMF Working Papers
DOI: https://doi.org/10.5089/9798400200755.001

We analyze the medium-term macroeconomic impact of the Covid-19 pandemic and associated lock-down measures on low-income countries.
Focus: the impact over the medium-run of the degradation of health and human capital caused by the pandemic and its aftermath, exploring the trade-offs between rebuilding human capital and the recovery of livelihoods and macroeconomic sustainability.
Approach: A dynamic general equilibrium model is calibrated to reflect the structural characteristics of vulnerable low-income countries and to replicate key dimensions of the Covid-19 shock.
Principal conclusion: Absent significant and sustained external financing, the persistence of loss-of-learning effects on labor productivity is likely to make the post-Covid recovery more attenuated and more expensive than many contemporary analyses suggest.

Loss-of-learning and health deterioration from the pandemic have material medium-term macroeconomic effects in low-income countries.
Trade-offs exist between policies that rebuild human capital and those that prioritize immediate recovery of livelihoods and macroeconomic sustainability.
Without significant and sustained external financing, persistent loss-of-learning effects on labor productivity dampen and raise the cost of recovery.

Model type: dynamic general equilibrium model.
Calibration: reflects the structural characteristics of vulnerable low-income countries and replicates key dimensions of the Covid-19 shock.

Significant and sustained external financing is implied as necessary to avoid a more attenuated and more expensive post-Covid recovery driven by persistent loss-of-learning.
Policymakers face trade-offs between reallocating resources to rebuild human capital and addressing immediate livelihood and macroeconomic stability needs.

Authors: Edward F Buffie, Christopher S Adam, Luis-Felipe Zanna, Kangni R Kpodar
Date: February 4, 2022
Series: Working Paper No. 2022/025
Issue: 025
Volume: 2022
Pages: 60
DOI: https://doi.org/10.5089/9798400200755.001
Stock No: WPIEA2022025
ISBN: 9798400200755
ISSN: 1018-5941
Subjects: COVID-19, Education, Health, Human capital, Labor, Wages
Keywords: baseline calibration, Covid recovery, Covid-19, COVID-19, Debt, Fiscal Policy Human Capital, Global, Growth, Human capital, IMF working paper Institute, internal rate of return, Labor Markets, loss-of-learning effect, production function, Public Investment, wage curve, Wages, Welfare

IMF Working Papers — "Loss-of-Learning and the Post-Covid Recovery in Low-Income Countries", February 4, 2022