The Road to Economic Recovery: Pandemics and Innovation

31 Pages Posted: 17 Sep 2020

See all articles by Lipeng Wang

Lipeng Wang

University of Essex - Essex Business School

Mengyu Zhang

University of Kent, Kent Business School

Thanos Verousis

University of Essex

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

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

Mengyu Zhang

University of Kent, Kent Business School ( email )

CT2 7NP
United Kingdom

Thanos Verousis (Contact Author)

University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

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