How Should Policy Responses to the COVID-19 Pandemic Differ in the Developing World?

Abstract

This paper quantitatively analyzes how policy responses to the COVID-19 pandemic should differ in developing countries. To do so we build an incomplete-markets macroeconomic model with heterogeneous agents and epidemiological dynamics that features several of the key distinctions between advanced and developing economies germane to the pandemic. We focus in particular on differences in: age structure, fiscal capacity, healthcare capacity, informality, and the frequency of contacts between individuals at home, work, school and other locations. The model predicts that blanket lockdowns are less effective in developing countries, saving fewer lives per unit of lost GDP. In contrast, age-specific policies are even more effective, since they focus scarce public funds on shielding the smaller population of older individuals. School closures are also more effective at saving lives in developing countries, providing a greater reduction in secondary transmissions between children and older adults at home.

COVID-19 and Emerging Markets: A SIR Model, Demand Shocks and Capital Flows

“…They show that targeted measures such as full lockdown for the elderly group could be more effective. Alon et al (2020) also considers a closed economy model but approaches the problem from the developing country perspective, considering market distortions and the presence of an informal sector and hand to mouth consumers. They realize that such economies cannot fully lockdown and argue that lockdowns on the elderly population might be better.…”

Who Should Work from Home during a Pandemic? The Wage-Infection Trade-off

“…consider the heterogeneity of the trade-off at the micro level. Some exceptions are Alon et al (2020) and Brotherhood et al (2020), which consider differences by age, and Aum et al (2020b), which considers differences by workers' occupation and skill level. In panel (a), for a given fraction of aggregate employment working from home on the horizontal axis, the reduction in aggregate exposure is plotted for the optimal policy (dashed line), the constrained optimal policy (solid line), the policy that minimizes aggregate exposure (line with diamonds), and the policy that minimizes aggregate wage losses (line with circles).…”

The Great Lockdown and the Big Stimulus: Tracing the Pandemic Possibility Frontier for the U.S.

“…Alfaro et al, 2020;Alvarez et al, 2020;Atkeson, 2020;Eichenbaum et al, 2020;Farboodi et al, 2020;Jones et al, 2020;Krueger et al, 2020;Moser and Yared, 2020;Piguillem and Shi, 2020;Rachel, 2020;Toxvaerd, 2020); smarter and more targeted policies in alternative to indiscriminate lockdowns (e.g. Acemoglu et al, 2020;Akbarpour et al, 2020;Alon et al, 2020b;Azzimonti et al, 2020;Berger et al, 2020;Dorn et al, 2020;Favero et al, 2020;Glover et al, 2020;Gollier, 2020;Grimm et al, 2020); the relative importance of demand and supply shocks (e.g. Brinca et al, 2020;Guerrieri et al, 2020); the long-run implications of the virus for the economy (e.g.…”