The Road to Economic Recovery: Pandemics and Innovation

31 Pages Posted: 17 Sep 2020

See all articles by Lipeng Wang

Lipeng Wang

Zhejiang University - School of Management

Mengyu Zhang

University of Sheffield

Thanos Verousis

Vlerick Business School

Date Written: June 29, 2020

Abstract

In this paper, we investigate the economic consequences of pandemics from an idea-based theory of economic growth. We assume that pandemics pose a threat to research productivity and analyse the long-term consequences of pandemic shocks to innovation output. We demonstrate that following a pandemic, innovation output is disrupted for approximately seven years. The effect of pandemic shocks on innovation output varies between countries, and sector to sector regarding economic activity. Pandemic shocks lead to a short-term drop in the number of patent applications. Crucially, the duration of a pandemic has a strong effect on innovation output. Overall, the effects of this most recent pandemic on future innovation output, and subsequently on growth, are expected to be felt long into the future. This paper supports the policies designed to reduce the effect of the “Great Lockdown” on research productivity. Policies that target the more innovative firms are moving in the right direction in terms of reducing the time it will take for innovation to recover from the effects of COVID-19.

Keywords: Innovation, Pandemic, Local projection, COVID-19

JEL Classification: O3, O4

Suggested Citation

Wang, Lipeng and Zhang, Mengyu and Verousis, Thanos, The Road to Economic Recovery: Pandemics and Innovation (June 29, 2020). Available at SSRN: https://ssrn.com/abstract=3638187 or http://dx.doi.org/10.2139/ssrn.3638187

Lipeng Wang

Zhejiang University - School of Management ( email )

Hangzhou, Zhejiang Province 310058
China

Mengyu Zhang

University of Sheffield ( email )

17 Mappin Street
Sheffield, Sheffield S1 4DT
United Kingdom

Thanos Verousis (Contact Author)

Vlerick Business School ( email )

Library
REEP 1
Gent, BE-9000
Belgium

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