The Impacts of the Coronavirus on the Economy of the United States
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The Impacts of the Coronavirus on the Economy of the United States Terrie Walmsley 1
& Adam Rose
2
& Dan Wei
3
Received: 5 September 2020 / Accepted: 6 November 2020/ # Springer Nature Switzerland AG 2020
Abstract
We present a formal analysis of the macroeconomic impacts of the COVID-19 pandemic in the U.S., China and the rest of the world. Given the uncertainty regarding the severity and time-path of the infections and related conditions, we examine three scenarios, ranging from a relatively moderate event to a disaster. The study considers a comprehensive list of causal factors affecting the impacts, including: mandatory closures and the gradual re-opening process; decline in workforce due to morbidity, mortality and avoidance behavior; increased demand for health care; decreased demand for public transportation and leisure activities; potential resilience through telework; increased demand for communication services; and increased pent-up demand. We apply a computable general equilibrium (CGE) model, a state-of-the-art economy-wide modeling technique. It traces the broader economic ramifications of individual responses of producers and consumers through supply chains both within and across countries. We project that the net U.S. GDP losses from COVID-19 would range from $3.2 trillion (14.8%) to $4.8 trillion (23.0%) in a 2-year period for the three scenarios. U.S. impacts are estimated to be higher than those for China and the ROW in percentage terms. The major factor affecting the results in all three scenarios is the combination of Mandatory Closures and Partial Reopenings of businesses. These alone would have resulted in a 22.3% to 60.6% decrease in U.S. GDP across the scenarios. Pent-up Demand, generated from the inability to spend during the Closures/Reopenings, is the second most influential factor, significantly offsetting the overall negative impacts. Keywords COVID-19 . Macroeconomic impacts . Telework . Healthcare costs . Avoidance behavior . Pent-up demand JEL Classifications E65 . I15 . C68
This article is part of the Topical Collection on Economics of COVID-19
* Adam Rose [email protected] Extended author information available on the last page of the article
Economics of Disasters and Climate Change
Introduction COVID-19 is already having far-ranging economic consequences, and the end is not yet in sight. This paper summarizes a formal analysis of the macroeconomic impacts of the pandemic in the U.S., China and the rest of the world. Given the uncertainty regarding the severity and time-path of the infections and related conditions, we examine three scenarios, ranging from a relatively moderate event to a disaster. Specifically, the study considers a comprehensive list of causal factors affecting the impacts, including: mandatory closures and the gradual re-opening process; decline in workforce due to morbidity, mortality and avoidance behavior; increased demand for health care; decreased demand for public transportation and leisure activities; potential resilience through telework; incr
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