The Unequal Impact of COVID-19 Across Countries
Abstract
I evaluate the effects of COVID-19 across countries. In lower income countries, fewer jobs can be performed from home, hospital capacity is lower, and enduring long periods with no income is harder. On the other hand, these countries have younger populations, making death less likely. To study the overall effect, I extend the SIR model in Eichenbaum et al. (2020c), with a subsistence level of consumption, work-at-home possibilities, hospital capacity, and a death rate that depends on the age distribution. I find that in low income countries infections are larger, but there are no differences in the death rate because of younger populations. A 1% lower income increases infections by 330 people per million, and increases the fall of consumption by 0.03%. Using Google mobility data, I confirm that traffic around workplaces has fallen more in rich countries. Social distancing policies increase inequality. A better strategy would consist of loans to finance imports: assuming an interest rate of 5%, the optimal loan would reduce the elasticity of infections to GDP by 10%. Also, loans are cheaper in low income countries, ranging from a present value under $200 per capita in Ecuador to almost $5,000 in Ireland.
[paper]
I evaluate the effects of COVID-19 across countries. In lower income countries, fewer jobs can be performed from home, hospital capacity is lower, and enduring long periods with no income is harder. On the other hand, these countries have younger populations, making death less likely. To study the overall effect, I extend the SIR model in Eichenbaum et al. (2020c), with a subsistence level of consumption, work-at-home possibilities, hospital capacity, and a death rate that depends on the age distribution. I find that in low income countries infections are larger, but there are no differences in the death rate because of younger populations. A 1% lower income increases infections by 330 people per million, and increases the fall of consumption by 0.03%. Using Google mobility data, I confirm that traffic around workplaces has fallen more in rich countries. Social distancing policies increase inequality. A better strategy would consist of loans to finance imports: assuming an interest rate of 5%, the optimal loan would reduce the elasticity of infections to GDP by 10%. Also, loans are cheaper in low income countries, ranging from a present value under $200 per capita in Ecuador to almost $5,000 in Ireland.
[paper]