Global loss of production capacity caused by the COVID-19 pandemic

Alfredo Coutiño and Mark Zandi

Journal of Policy Modeling, 2021, vol. 43, issue 3, 493-502

Abstract: The global economy faces a loss of production capacity among the most severe in at least the past half-century as a result of the recession caused by the COVID-19 pandemic. It will take several years of persistent investment efforts to restore the pre-pandemic level of capacity and put global output back to potential. By using a production function based on the incremental capital-output ratio, we estimate the loss of production capacity for the global economy and for the two main world locomotives, the U.S. and China. To do this, we estimate the production capacity implied in our current recession baseline and the capacity that would have existed in the absence of the pandemic (precrisis scenario). The difference between the two estimates is defined as the loss of capacity generated by the pandemic. The results also allow us to extract some policy implications in terms of mitigation measures and investment requirements.

Keywords: Economic growth; Production function; Production capacity; Capital-output ratio; Harrod-Domar model; Koyck model (search for similar items in EconPapers)
JEL-codes: C1 C5 E22 E23 E27 F6 O4 O5 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0161893821000430
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:43:y:2021:i:3:p:493-502

DOI: 10.1016/j.jpolmod.2020.07.003

Access Statistics for this article

Journal of Policy Modeling is currently edited by A. M. Costa

More articles in Journal of Policy Modeling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().