COVID-19 Outbreak, Social Response, and Early Economic Effects: A Global VAR Analysis of Cross-Country Interdependencies

Abstract

The COVID-19 pandemic underscored the importance of countries' interconnections in understanding and reacting to the spread of the virus.This paper uses a global model with a sample of 41 countries to study the interdependencies between COVID-19 health shocks, populations' risk perceptions about the disease, and their social distancing responses; it also provides some early evidence about potential economic effects.Social networks are a central component in understanding the international transmission. We exploit a dataset on existing social connections across country borders, made available by Facebook, and show that social networks help explain not only the spread of the disease, but also cross-country spillovers in risk perceptions and in social behavior. Social distancing responses across countries are measured based on aggregated mobility tracking indicators, obtained from Google Mobility Reports.We estimate a Global VAR (GVAR) model, which allows for endogeneity of each health, social, and economic, domestic variable, and for a dependence of domestic variables on country-specific foreign aggregates, which depend in turn on the matrix of social connections.Our empirical results highlight the importance of cross-country interdependencies and social networks. Risk perceptions and social responses are affected by experiences abroad, with Italy and the U.S. playing large roles in our sample. The social distancing responses to domestic health shocks are heterogeneous across countries, but they share some similarities: they adjust only gradually and with delay, hence displaying adaptive behavior.Early indicators are suggestive of unemployment consequences that vary widely across countries, depending on their labor market characteristics. Unemployment is particularly responsive to health shocks in the U.S. and Spain, while the fluctuations are attenuated almost everywhere else.

Explaining the homogeneous diffusion of COVID-19 nonpharmaceutical interventions across heterogeneous countries

“…As much of Europe and North America has "deescalated" interventions during the summer of 2020 and, on occasion, reinitiated restrictive policies, future research may extend our data (open to the public) to examine adoption, "deescalation," and potential "readoption" of COVID-19 policies. Such research may also seek to collect, for example, social network data or other data to gauge the underlying causal mechanisms of COVID-19 policy diffusion in terms of "learning," "emulation," or "coercion" across nation-states (9,35).…”

“…Countries may also be more strongly influenced by countries with whom they share a religion and therefore norm systems (ref. 10 (34,35).…”

“…93–123; and ref. 33 ) or with whom they have intense relations and thereby share an interdependence ( 34 , 35 ).…”

Working from home and income inequality: risks of a ‘new normal’ with COVID-19

“…Similarly, the Global Labour Organisation (GLO) Cluster Coronavirus published more than 30 discussion papers on the economics of COVID-19. A large number of articles investigated the consequences of the virus spread on the labour market in different countries (Béland et al 2020a;Bennedsen et al 2020;Bertocchi and Dimico 2020;Duman 2020;Greyling et al 2020;Milani 2021;Nikolova and Popova 2020). Within this strand of increasing current literature, several studies recently analysed the WFH phenomenon because of its sudden growth of prominence.…”

Analysis of communities of countries with similar dynamics of the COVID-19 pandemic evolution

“…This might be observed in the levels of unemployment. In this regard, Milani (2020) finds that the behavior of unemployment across countries has been very heterogeneous. In Latin American countries, and even in the US, socially disadvantaged populations cannot follow the order to stay at home.…”