Socio-Economic Impact of COVID-19 Pandemic

21 Pages Posted: 1 Nov 2020

See all articles by Jonathan Barlow

Jonathan Barlow

Boston University

Irena Vodenska

Boston University Metropolitan College

Date Written: October 28, 2020

Abstract

In this work, we propose a dynamic cascade model to investigate the systemic risk posed by sector level industries within the U.S. inter-industry network. We then use this model to study the effect of the disruption presented by COVID-19 on the U.S. economy. We construct a weighted digraph G = (V;E;W) using the industry-by-industry total requirements table for the year 2018, provided by the Bureau of Economic Analysis. We impose an initial shock that disrupts the production capacity of one or more industries and calculate the propagation of production shortage with a modified Cobb-Douglas production function. In the case of COVID-19, the initial shock is modeled on the loss of labor between March and April 2020, as reported by the Bureau of Labor Statistics. The industries within the network are assigned a resilience r that determines the ability of an industry to absorb input losses, such that if the rate of input loss exceeds the resilience r, the industry fails and its outputs go to zero. We observe a critical resilience rc, such that below this critical value the network experiences a catastrophic cascade resulting in total network collapse.

Suggested Citation

Barlow, Jonathan and Vodenska, Irena, Socio-Economic Impact of COVID-19 Pandemic (October 28, 2020). Available at SSRN: https://ssrn.com/abstract=3720785 or http://dx.doi.org/10.2139/ssrn.3720785

Jonathan Barlow

Boston University ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

Irena Vodenska (Contact Author)

Boston University Metropolitan College ( email )

808 Commonwealth Avenue
Boston, MA 02115
United States

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