COVID’s Impact in Real Time: Finding Balance Amid the Crisis

IMF Blog, October 8, 2020

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Any lasting economic recovery will depend on resolving the health crisis.
Government lockdowns lowered infections but contributed considerably to the recession and had disproportional effects on vulnerable groups, such as women and young people.
A substantial part of the recession was driven by people voluntarily refraining from social interactions out of fear of contracting the virus.
Lifting lockdowns is unlikely to produce a decisive and sustained economic boost if infections remain elevated because voluntary social distancing will likely persist.
Lockdowns impose short-term costs but may lead to a faster economic recovery by lowering infections and thus the extent of voluntary social distancing.
Stringent and short-lived lockdowns could be preferable to mild and prolonged measures.

Data sources used: mobility data from Google and job openings posted on the website Indeed.
Sample coverage: 128 countries.
Findings on contributions to the initial mobility drop:
- Over the entire sample of 128 countries, lockdowns and voluntary social distancing contributed equally to the drop in mobility during the first 3 months of a country’s epidemic.
- The contribution of voluntary social distancing was larger in advanced economies where people can work from home more easily or can afford to stop working thanks to personal savings and social security benefits.
- In low-income countries, people are often unable to opt for voluntary social distancing due to lack of financial means to cope with temporary income loss.
Labor demand:
- Job posting data show both lockdowns and voluntary social distancing contributed substantially to the drop in labor demand.
Policy implication from data:
- The large contribution of voluntary social distancing to reductions in mobility and job postings cautions against lifting lockdowns while infections are still elevated.
- Addressing health risks is a pre-condition for a strong and sustained economic recovery.

Lockdowns can substantially reduce infections.
The effects are particularly strong if lockdowns are adopted early in a country’s epidemic.
Countries that adopted lockdowns when COVID-19 cases were still low experienced much better epidemiological outcomes relative to countries that intervened when cases were already high.
Lockdowns must be sufficiently strict to curb infections; this supports considering stringent, short-lived measures rather than mild, prolonged ones.
The conventional “lives versus livelihoods” trade-off is incomplete: effective early lockdowns may lead to faster economic recovery by containing the virus and reducing voluntary social distancing, and medium-term gains may offset short-term costs.

Data source for distributional analysis: anonymized and aggregated mobility data provided by Vodafone for Italy, Portugal, and Spain.
Gender effects:
- Stay-at-home orders and associated school closures led to a larger drop in the mobility of women relative to men.
- The larger decline for women is largely due to the disproportionate burden of child care, which can prevent women from going to work and jeopardize employment opportunities.
Age effects:
- Lockdowns tend to impact the mobility of younger people more strongly.
- Stay-at-home orders led to a sharper decline in the mobility of people aged 18 to 24 and 25 to 44.
- Younger populations often have younger children to care for when schools are closed and more frequently hold temporary job contracts that are likely to be terminated during a crisis, increasing inter-generational inequality risk.

Prioritize resolving the health crisis to enable sustained economic recovery.
Consider early, sufficiently strict, and short-lived lockdowns to reduce infections and voluntary social distancing, potentially yielding faster economic recovery.
Implement targeted policy interventions to protect vulnerable groups and prevent long-lasting widening of inequality, such as:
- Strengthening unemployment benefits.
- Supporting paid leave for parents.

Francesco Grigoli and Damiano Sandri; October 8, 2020 — COVID’s Impact in Real Time: Finding Balance Amid the Crisis