Pandemic Panic? Effects of Health System Capacity on Firm Confidence During COVID-19

Balagopal Gopalakrishnan, Jamus Lim and Sanket Mohapatra

IIMA Working Papers from Indian Institute of Management Ahmedabad, Research and Publication Department

Abstract: In this study, we examine the impact of health system capacity and government responses on firms’ business confidence in response to the COVID-19 pandemic. Using a sample of firm-level data from 53 countries, we find that ex ante proactive measures—such as health spending by the public and private sectors and availability of medical staff—have a favorable impact on the firms’ perceptions of risk and sentiment. This effect reduces as the number of COVID-19 cases rise, possibly as a result of the drain on a country’s health resources. We also find that the ex post reactive measures—such as health and containment actions, and the overall quality of government response—also play a role in bolstering business confidence. These effects vary by firm size and the level of development of the economy, and are largely impervious to prior epidemic experience.

Date: 2021-07-22
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Persistent link: https://EconPapers.repec.org/RePEc:iim:iimawp:14656

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