Lives and Livelihood, Not Quite a Trade-Off: A Cross-Country Analysis of the Short-Term Impact of COVID-19 Mortality on Real GDP

Abstract

Introduction. A supposed lives-livelihood trade-off (LLTO) has been at the centre stage of the COVID-19 pandemic, where policymakers often attempt to balance the health cost of COVID-19, including deaths, and the economic cost of lockdowns. Methodology. This paper uses country-level panel (longitudinal) data on real GDP, stringency of non-pharmaceutical interventions (NPIs), economic policy support, COVID-19 deaths, and vaccination to quantify the short-run LLTO. Beyond descriptive analysis, adjustments were made --- (1) two-stage least squares instrumental variables in a cross-sectional setting using pre-pandemic institutional quality as the excluded instrument, and (2) two-way fixed effects in a panel data setting. Findings. Real GDP is negatively associated with COVID-19 deaths, as does more stringent containment measures. However, the offsetting positive association of real GDP with economic policy support is substantial. A historical decomposition of average real GDP that the positive attribution of fiscal support roughly equates the negative attribution of lockdown stringency and COVID-19 mortality. Conclusion. Cross-country empirical evidence suggests no direct tradeoff between the economy, and public health. A change in policy thinking from a LLTO paradigm to a 'no trade-off' entails economic policy treating public health goals as invariant in supporting incomes through adequate, direct, and timely means.