A data-driven approach to measuring epidemiological susceptibility risk around the world

Alessandro Bitetto (), Paola Cerchiello () and Charilaos Mertzanis ()
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Alessandro Bitetto: University of Pavia
Paola Cerchiello: University of Pavia
Charilaos Mertzanis: University of Pavia

No 200, DEM Working Papers Series from University of Pavia, Department of Economics and Management

Abstract: Epidemic outbreaks are extreme events that become less rare and more severe. They are associated with large social and economic costs. It is therefore important to evaluate whether countries are prepared to manage epidemiological risks. We use a fully data-driven approach to measure epidemiological susceptibility risk at the country level using time-varying and regularly reproduced information that captures the role of demographics, infrastructure, governance and economic activity conditions. Given the nature of the problem, we choose both principal component analysis (PCA) and dynamic factor model (DFM) to deal with the presence of strong cross-section dependence in the data due to unobserved common factors. We conduct extensive in-sample model evaluations of 168 countries covering 17 indicators for the 2010-2019 period. The results show that the robust PCA method accounts for about 90% of total variability, whilst the DFM accounts for about 76% of the total variability. Our framework and index could therefore provide the basis for developing risk assessments of epidemiological risk contagion after the outbreak of an epidemic but also for ongoing monitoring of its spread and social and economic effects. It could be also used by firms to assess likely economic consequences of epidemics with useful managerial implication.

Keywords: Innovative Applications of O.R.; Epidemiological risk; Data-driven; Cross-country; Policy framework; Principal Component Analysis; Dynamic Factor Model; Machine learning (search for similar items in EconPapers)
JEL-codes: C38 C55 F68 I18 (search for similar items in EconPapers)
Pages: 54
Date: 2021-02
New Economics Papers: this item is included in nep-big and nep-hea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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