How Should Policy Responses to the COVID-19 Pandemic Differ in the Developing World?

Titan Alon (), Minki Kim and David Lagakos
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Titan Alon: University of California San Diego

No dp-350, Boston University - Department of Economics - The Institute for Economic Development Working Papers Series from Boston University - Department of Economics

Abstract: The COVID-19 pandemic has already led to dramatic policy responses in most advanced economies, and in particular sustained lockdowns matched with sizable transfers to much of the workforce. This paper provides a preliminary quantitative analysis of how aggregate policy responses should differ in developing countries. To do so we build an incomplete-markets macroeconomic model with epidemiological dynamics that features several of the main economic and demographic distinctions between advanced and developing economies relevant for the pandemic. We focus in particular on differences in population structure, fiscal capacity, healthcare capacity, the prevalence of “hand-to-mouth†households, and the size of the informal sector. The model predicts that blanket lockdowns are generally less effective in developing countries at reducing the welfare costs of the pandemic, saving fewer lives per unit of lost GDP. Age-specific lockdown policies, on the other hand, may be even more potent in developing countries, saving more lives per unit of lost output than in advanced economies.

Pages: 46 pages
Date: 2020-05
New Economics Papers: this item is included in nep-dge
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Citations: View citations in EconPapers (81)

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Working Paper: How Should Policy Responses to the COVID-19 Pandemic Differ in the Developing World? (2020)
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