In the six months following the US outbreak, these two factors contributed to a 26.1 percent and 12.2 percent fall in real GDP.
The COVID-19 outbreak has changed the behavior of businesses and households throughout its unpredictable course. These behavioral shifts, exacerbated by government interventions like as mandatory closures, have had a significant influence on the US economy.
A new study led by Adam Rose, research professor at the University of Southern California’s Price School of Public Policy, examines the economic consequences of specific behavioral responses such as business closures, re-openings, workplace avoidance, and a reduction in entertainment activities, as well as federal government stimulus packages.
Through local supply-chain interactions and international trade ties between the United States and other regions, the research monitored the broader economic repercussions of individual producer and consumer responses. The researchers were able to trace the ripple effects of direct behavioral responses (relating to public transportation, mass gatherings, and in-person shopping) to the pandemic, such as resistance (telework and deferred expenditure) and avoidance behavior, using this method.
“Businesses and households changed their behavior greatly in response to the pandemic and some of those will linger throughout the recovery,” said Rose.
Here are a few of the most important findings:
- The highest economic losses were related with forced business closures and slow reopenings, followed by household avoidance of the workplace and other activities. These two causes were responsible for decreases in real GDP of 26.1 percent and 12.2 percent, respectively, in the first six months following the outbreak in the United States.
- Behavioral avoidance resulted in a 40% to 65% drop in activity across six domains, including air travel, local public transit, shopping, dining out, large-crowd events, and recreation.
- Pent-up demand was discovered to be a substantial contributor in the recovery process, increasing semi-annual growth by 6.9% above the baseline recovery trend by the end of 2023.
- Fiscal stimulus initiatives implemented early on were found to boost semi-annual GDP by a total of 8.9 percent by the second half of 2020. The subsequent rounds had a net favorable effect.
The researchers established an analytical framework that may be used to predict the economic repercussions of not only pandemics, but also other sorts of calamities, Rose noted.
“The results can be used by policymakers to fine-tune countermeasures relating to aspects of a broad range of disasters, including mandatory business closures, stay-at-home orders, health policy, and stimulus packages.”
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