Policy responses to COVID-19 pandemic waves: Cross-region and cross-sector economic impact

Abstract

This paper proposes a modelling approach to assess the cross-region and cross-sector economic impacts of the restrictions imposed by governments to contain the COVID-19 pandemic. The nationwide lockdown imposed in Italy during the first wave of the pandemic is used as a benchmark. However, the adopted approach allows an ex-ante assessment of alternative policy responses, in the event of successive pandemic waves, in order to rationalise the policy intervention and reach the best possible compromise between containing the risk of contagion and reducing economic losses. The used approach consists of a non-linear programming model based on a multiregional Input-Output (I-O) table, which guarantees greater flexibility than traditional I-O analysis. It is applied to estimate both direct and indirect losses of GDP and employment produced by alternative policy responses represented by general and differentiated lockdowns. The evidence deriving from the Italian experience shows a sort of learning process through successive waves based on the introduction of increasingly flexible and tailored policy responses to the pandemic.

Keywords: COVID-19 pandemic; Constrained non-linear programming; Ex-ante policy response assessment; Multi-regional input–output tables.

Fig. 1

Distribution of GDP impacts by region at NUTS-2 level and type of policy response, Italy (% variation).

Fig. 2

Distribution of employment impacts by region at NUTS-2 level and type of policy response, Italy (% variation).