The Impacts of the Coronavirus on the Economy of the United States

51 Pages Posted: 27 Aug 2020

See all articles by Terrie Walmsley

Terrie Walmsley

ImpactECON, LLC; University of Southern California - Center for Risk and Economic Analysis of Terrorism Events (CREATE)

Adam Rose

University of Southern California - Sol Price School of Public Policy

Dan Wei

University of Southern California - Sol Price School of Public Policy

Date Written: August 23, 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 other 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 Mandatory Closures and the 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 negative impacts stemming from other causal factors.

Keywords: COVID-19, Macroeconomic impacts, Telework, Healthcare costs, Avoidance behavior, Pent-up demand

JEL Classification: E65, I15, C68

Suggested Citation

Walmsley, Terrie and Rose, Adam and Wei, Dan, The Impacts of the Coronavirus on the Economy of the United States (August 23, 2020). Available at SSRN: https://ssrn.com/abstract=3678835 or http://dx.doi.org/10.2139/ssrn.3678835

Terrie Walmsley

ImpactECON, LLC ( email )

1942 Broadway
Suite 314
Boulder, CO 80302
United States

University of Southern California - Center for Risk and Economic Analysis of Terrorism Events (CREATE) ( email )

United States

Adam Rose

University of Southern California - Sol Price School of Public Policy ( email )

Los Angeles, CA 90089-0626
United States

Dan Wei (Contact Author)

University of Southern California - Sol Price School of Public Policy ( email )

Los Angeles, CA 90089
United States

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