A Literature Review on Economic Policy Response to Covid-19

An excellent review of empirical findings regarding the various provisions is contained in this FEDS Notes article, by Elena Falcettoni, and Vegard Nygaard.

The COVID-19 pandemic has kept economists busy analyzing many aspects of economic side of the coronavirus impact. This note is meant to present an overview of what economists have analyzed regarding the implications of two of the main components of the CARES Act that affect individuals: the increased UI benefits and the stimulus checks. We present the findings from the literature on these two policies with an eye on potential future governmental interventions.

Taken together, these two components have been effective at providing stimulus and lowering poverty. In the aggregate, Kaplan et al. (2020) (PDF) find that the initial UI benefits and stimulus payments boosted aggregate consumption by 2 percentage points, while Bayer et al. (2020) show that the CARES transfers reduced the output loss due to the pandemic by up to 5 percentage points.

Complete note here.


58 thoughts on “A Literature Review on Economic Policy Response to Covid-19

  1. ltr

    March 3, 2021



    Cases   ( 29,456,377)
    Deaths   ( 531,652)


    Cases   ( 11,156,748)
    Deaths   ( 157,471)


    Cases   ( 4,194,785)
    Deaths   ( 123,783)


    Cases   ( 3,810,316)
    Deaths   ( 87,542)


    Cases   ( 2,472,896)
    Deaths   ( 71,711)


    Cases   ( 2,097,194)
    Deaths   ( 187,187)


    Cases   ( 875,559)
    Deaths   ( 22,105)


    Cases   ( 89,931)
    Deaths   ( 4,636)

      1. ltr

        I really, really must be a fool, but I thought and think this germane to the topic. I actually think the data as just presented tells a critically important story. I am so sorry not to be able to understand, but I do try. I am sorry.

        1. Menzie Chinn Post author

          ltr: The data is germane to the topic, but recounting data in a format that is hard to understand is not helpful to fostering understanding of your arguments. If you could link to a graph or table, and add in a sentence which allows the readers to glean your point, that would be useful. (There is a term, “MEGO” for “my eyes glaze over”, which applies each time I see a list of numbers like you’ve provided, time after time).

          1. ltr

            Thank you so much for explaining and helping so much.

            Yes, I can do all sorts of graphs, I can reference all sorts of graphs, but early on I decided that focusing on just a few numbers day to day showed clearly what was happening and along with explanations of how the epidemic was approached in China I thought I understood how what became a pandemic “might” be approached in America or a few other countries.  I learned remarkably little from the Financial Times style of graphing and often found accounts in the New York Times or Washington Post confusing.  Likely I was not smart enough, but accounts from China struck me as clear and the differences that emerged in experiences in a few countries were startling to me.

            From the very beginning of setting down data here, I was told the data were wrong or even false.  I would show that in China asymptomatic cases were recorded and publicly reported and isolated and contact traced, but even Donald Trump would be saying that the Chinese denied asymptomatic cases were significant.  Nonetheless, I thought I needed to set down a little data and let readers make sense of the increasing contrasts.  Also, I referenced all sorts of what appeared to be supporting articles to my numbers.
            I am sorry I apparently do not know how to be compelling, but I try and 530,000 coronavirus caused deaths in America have been reason enough for me to keep trying.

            I wish I were compelling and really am sorry not to be, but I try to all my limited ability.

          2. Menzie Chinn Post author

            ltr: Well, I urge you to consult Tufte’s work. I’m just saying a set of cut-and-paste numbers is unlikely to be illuminating, yet just takes up space in the comments section in a distracting fashion.

        2. ltr

          Yes, I know the work of Edward Tufte and am grateful for the suggestion. Nonetheless, my presentation is meaningful to me and I just do not know how to set aside what I know after all the effort I made at the knowing. Cezanne painted and repainted Mont Sainte-Victoire, often from the same vantage point and no painter had done landscapes in that way before and the work was often indifferently viewed but the work is intensely meaningful to many now.

          I am ever so grateful, and only wish I could see what I do not see now. My numbers are meaningful to me, and are set down for the sake of others, however fruitlessly. Please do erase all that is bothering.

          Again, I am grateful for such consideration.

          1. ltr

            Cezanne painted and repainted Mont Sainte-Victoire, often from the same vantage point, and no painter had done landscapes in that way before and the work was often indifferently viewed but the work is intensely meaningful to many now.

            [ I have photographs of the Mont Sainte-Victoire portrayals I have personally seen and will count. I remember painters sitting in galleries, in turn painting from the Cezannes. I will be visiting these works again and learning. ]

          2. baffling

            ltr, Cézanne did something new and original. nobody had done that before. on the other hand, you are not the first person to post data daily on an event. this is not a new and unique concept. however, based on the people who did this in the past, it has been determined to be a very poor way to convey information, especially to observe a trend. i don’t think your effort will produce a different outcome than has already been observed by other efforts. maybe your cezanne comparison was not appropriate.

  2. ltr

    March 3, 2021

    Coronavirus   (Deaths per million)

    UK   ( 1,817)
    US   ( 1,600)
    Mexico   ( 1,442)
    France   ( 1,339)

    Germany   ( 854)
    Canada   ( 582)
    India   ( 113)
    China   ( 3)

    Notice the ratios of deaths to coronavirus cases are 8.9%, 3.0% and 2.3% for Mexico, the United Kingdom and France respectively.

    1. Willie

      The raw numbers are not especially useful without context. For example, I find it hard to fathom that 8.9% of infected Mexicans have died. That would indicate a lack of testing, not an elevated death rate. Maybe. There’s no way to know without context.

      1. ltr

        I find it hard to fathom that 8.9% of infected Mexicans have died. That would indicate a lack of testing, not an elevated death rate. Maybe….

        [ Interesting; thank you for the suggestion, which along with treatment accessibility is considered the answer. ]

    2. Barkley Rosser

      And for Taiwan, population 23.78 million, there have been 8 Covid-19 deaths total, a bit over 0.3 per million, an order of magnitude lower than PRC. Perhaps it should be listed at the bottom to show how it has done so much better than all those other political entities.

      1. baffling

        excellent point. this will help the reader see results that are excellent (taiwan), good (china) and poor (the rest).

        ltr, prof. chinn’s recommendation of a graph would be quite useful. if you are trying to post data daily to show a trend, most readers will NOT remember the data from the previous day. so a graph is much better to convey the information. and if you are not trying to show the trend, it is not necessary to post the numbers daily, as it is repetitious and of little value. 5 day moving averages for the data do not move that dramatically.

  3. ltr


    March 4, 2021

    Chinese mainland reports 10 new COVID-19 cases

    The Chinese mainland recorded 10 new COVID-19 cases on Wednesday, all from overseas, data from the National Health Commission (NHC) showed on Thursday.

    No more deaths related to COVID-19 were reported, the NHC said.

    Fourteen new asymptomatic cases were recorded on Wednesday, and 247 asymptomatic patients are under medical observation.

    This brought the total number of confirmed COVID-19 cases on the Chinese mainland to 89,943, with the death toll unchanged at 4,636.

    Chinese mainland new locally transmitted cases


    Chinese mainland new imported cases


    Chinese mainland new asymptomatic cases


  4. ltr


    January 22, 2021

    Beware of mashup indexes: how epidemic predictors got it all wrong

    In October 2019, the Johns Hopkins University’s Bloomberg School of Public Policy, Nuclear Threat Initiative, and the Economist Intelligence Unit published, with significant publicity, the first World Health Preparedness Report and Global Health Security Index. It claimed to study the degree of readiness to confront epidemics country-by-country. In a report of 324 pages (in addition to a Website that allows one to explore individual countries), the authors used six dimensions (or categories) to assess countries’ overall preparedness: prevention of the emergence of pathogens, early detection, rapid response, robustness of the health system, commitment to improving national health capacity, and overall (country’s) risk environment. The six categories themselves were built from 34 indicators, 85 subindicators and 140 questions. The authors then combined these six dimensions into an overall score, the index of Global Health Security (GHS). In this blog I shall be referring to that index.

    The GHS index ranked 195 countries according to the number of points they have obtained from all the categories. The range was theoretically from 0 to 100, but the actual range went from 16.5 (the least prepared country; Equatorial Guinea) to 83.5 (the best prepared). The three top countries were the United States, UK, and the Netherlands.

    As the “luck” would have it fewer than two months after the publication of the first global preparedness index, covid-19 struck the world with an unusual ferocity. So it is reasonable to ask how the experts’ judgments about various countries’ preparedness look compared to the actual outcomes in the fight against covid-19. For the latter, we use the number of covid-19 deaths per million inhabitants as of January 21, 2021. The data are collected from Worldometer. The death data are subject to many issues, from underestimation in many countries (as shown by the alternative statistic of excess deaths) to less frequent but possible overestimation. I will address these issues briefly below, and it will be indeed interesting to contrast the GHS index with excess death data too.

    If GHS were to predict the outcomes of covid well, we would expect that countries with a high score would have lower rates of fatalities. Or alternatively, we could disregard the cardinal measurement, and look at the ranks where we would expect that higher ranked countries according to GHS would be also higher ranked in terms of how successful they are in fighting the virus (i.e., they would have relatively fewer fatalities). The second comparison is in some sense better because its requirements are less: it requires that GHS has broadly gotten correct the ranking of countries, not necessarily that it has successfully captured the absolute differences in outcomes.

    Finally, note that GHS in principle already includes all information thought relevant for combatting the pandemic. Thus adding to it factors that we believe might explain the outcome is inconsistent. Whatever experts believed was relevant was, by definition, included in the GHS index. Our objective is thus to test how successful were experts in choosing the relevant factors, in assigning them the correct weights, and coming up with an overall index.

    The answer is striking. The GHS index is not only unable to predict outcomes, that is, is not only orthogonal (unrelated) to the outcomes, but its rankings were often the inverse of the currently observed success rankings.  The two graphs below show the results. The graph on the left shows that the GHS index is positively related to the rate of deaths—the very opposite of what we expect. The graph on the right shows that high ranked countries, like No. 1, the United States, No. 2, the UK, or No. 3, the Netherlands, are among the worst performers. Had the index got rankings correctly, we would have expected a 45 degree positively sloped line. On the contrary, we see that the US is ranked 145th (out of 153 countries) according to its fatality rate: the difference between its predicted and actual rank is 144 positions! The UK, ranked by the preparedness index as the second best, is 149th according to the actual outcomes.


    For many rich countries, the gaps between the predicted and observed performance are enormous….

    — Branko Milanovic

  5. JohnH

    “Here’s the strange thing. In 2020, America was indeed invaded. Its national security was smashed to bits. Hundreds of thousands of its citizens were slaughtered on the battlefields of the conflict that followed. And yet the Pentagon and the rest of the national security state, the institutions in which American taxpayers had, through their congressional representatives, invested essentially everything in this century, were missing in action. Yes, in the years 2018-2020, as Stephanie Savell of the Costs of War Project recently pointed out, the U.S. military was indeed conducting counter-terrorism operations of one sort or another, ranging from actual ground combat to air and drone strikes to training allied forces, in 85 countries across this planet. (Only the other day, some of its planes struck supposedly Iranian-backed militia targets in Syria, killing a number of militiamen, a first of the Biden era.) In addition, more than 200,000 American military personnel are deployed on hundreds of military bases around the world. But in the U.S., in the midst of a national security crisis, that military has essentially had no impact at all. Not a shot did it fire, not a drone or plane did it call into action. All those trillions of dollars that had been invested in its advanced weaponry and its endless wars of this century mattered not at all when Covid-19 arrived on our shores.”

    Is the US’ gross misallocation of resources a a macroeconomic concern or not? How about an economic concern? How can an economy perform optimally when a significant amount of its resources gets wasted? In fact we don’t really even know how much gets misallocated and wasted, because DOD has never passed a GAO audit. And despite all the Empire’s missiles and all it’s systems, the US was utterly unprepared when a real enemy—COVID-19–attacked.

    1. ltr


      January 17, 2006

      War’s Stunning Price Tag
      By Linda Bilmes and Joseph Stiglitz – Los Angeles Times


      September 19, 2011

      America’s Costly War Machine
      Fighting the war on terror compromises the economy now and threatens it in the future.
      By Linda Bilmes and Joseph Stiglitz – Los Angeles Times

      [ Likely eyes glazed on reading Stiglitz and Bilmes over the years, because the numbers kept increasing but there surely was no meaningful response. ]

        1. pgl

          Yea but the story also notes their defense spending is just over $200 billion for the year. Why the increase? The story talks about increased tensions with the US. Way to go Mike Pompeo – your stabber rattling has caused China to beef up its military spending.

    2. pgl

      Marginally relevant at best but yea we do spend too much abroad. But to suggest we did not have the intel or the National Guard to address 1/6 is misplaced. It is well documented that the National Guard did its job once the Sec. of Defense gave them the green light. The problem was that it delayed this authorization for 3 hours and 19 minutes as his boss was the same person who led this insurrection.

      When the Commander in Chief is also a wannabe dictator and traitor, we should breathe a sigh of relief that his vile scheme ultimately failed. Of course anyone who voted for a third party in 2016 might one day take a wee bit of self reflection that his choice helped get this traitor in the White House in the 1st place. But we know you do not do self reflection as you prefer to hurl dishonest accusations that I work for Wall Street.

  6. Moses Herzog

    OK, I’m just starting to get sauced here on cheap Beringer “Main and Vine” and cheapo strawberita but am actually in a good mood. Oh, I almost fell into old habits there, the joke would have been so good. Can I make personal digs if I am staying semi-germane to the topic?? (joke) This is a SIR model in the Kaplan paper right?? Isn’t this the appropriate mark in time when Rick Stryker is supposed to drop some of his SIR model knowledge on us?? Come on, Menzie, you knew I could only hold out so long, but you gotta filter me if I say something embarrassing or use my real name.

    I mean really, I’m only making an enquiry for “deeper knowledge” from Rick Stryker. Is that so wrong??

    1. 2slugbaits

      This is a SIR model in the Kaplan paper right?

      Yes. Well, technically Kaplan et al. embellished it with a couple other compartmental states, but that’s not what concerns me. The Kaplan paper was written in September and since then we’ve learned that a more realistic model might be a member of the SIS family rather than the SIR family. In the SIS family an infected person can get re-infected and does not develop a permanent immunity. The common cold is an example of a SIS model. What the simple SIR model overlooks is that viruses mutate. We now know better. This is important because a lot of governments targeted the wrong metric. Instead of trying to minimize the number of infections, governments targeted what they considered a manageable level of hospitalizations. As a result we ended up with far too many infections, which in turn generated far too many mutations. The math behind the SIR model also assumes that a recovered or vaccinated person cannot infect someone that is in the uninfected susceptible category. That’s a big assumption. All this tells me that the Kaplan paper likely understated the economic costs of not suppressing the virus and adopting the kind of “we need to learn to live with it” approach that characterized so many governments; e.g., the UK, Sweden, Brazil, and South Dakota.

      1. Moses Herzog

        @ 2slugbaits
        This is actually educational, and I appreciate it, I said something totally “off the wall” after easily one bottle and I just want to say, I totally dig this whole new filter system Menzie has going. Yes, I think I just insulted myself er something. But, this is interesting, you took something I meant as an insult to another person and made it useful. That’s why in my book you’re one of the top 3 commenters on this blog, and there ARE some sharp ones here.

        I hope Menzie will delete the other comments I made based on his better judgement.

        1. Menzie Chinn Post author

          Moses Herzog: I didn’t filter your youtube posts, I just hadn’t had a chance to go through them to ensure they were ok. In other words, if you want your comments to be posted fairly rapidly, do not include youtube videos (or any other videos for that matter) that I have to check.

      2. baffling

        “The math behind the SIR model also assumes that a recovered or vaccinated person cannot infect someone that is in the uninfected susceptible category. That’s a big assumption.”
        this is a very big problem with a virus that spreads exponentially. when that is the case, better treatment is not a good solution. Suppression of the virus in the population, and applying methods to eliminate exponential spread (ie masking and social distancing), should be the goal. exponential growth is simply too fast to contain.

  7. ltr

    Cezanne painted and repainted Mont Sainte-Victoire, often from the same vantage point, and no painter had done landscapes in that way before and the work was often indifferently viewed but the work is intensely meaningful to many now.

    [ I have photographs of the Mont Sainte-Victoire portrayals I have personally seen, and will count. I remember painters sitting in galleries, in turn painting from the Cezannes. I will be visiting these works again and learning. ]

  8. ltr


    March 4, 2021

    The New York Times Has not Heard of China’s (or Russia’s) Vaccines
    By Dean Baker

    I guess it is hard to get news at the world’s leading newspapers, but this lengthy podcast * on Bill Gates and his efforts to make vaccines available to the developing world never once mentioned the vaccines developed by China or Russia. This is more than a bit incredible because at this point, far more of the Russian and Chinese vaccines are going to developing countries than the vaccines supplied by Western countries through COVAX, the international consortium set up by the WHO and supported by the Gates Foundation.

    Are New York Times reporters prohibited from talking about the Chinese and Russian vaccines?

    This piece is also incredible in that it explicitly says that because Gates doesn’t want the government-granted patent monopoly system of financing from being challenged, there is no alternative. That could well be true, but it speaks to the incredible corruption of our politics and our economy, that because one incredibly rich person is opposed to having a corrupt, inefficient, and antiquated system ** reformed, it will not be reformed.

    * https://www.nytimes.com/2021/03/03/podcasts/the-daily/coroanvirus-vaccine-bill-gates-covax.html

    ** https://www.cepr.net/images/stories/reports/ip-2018-10.pdf

  9. pgl


    BLS reports. Now the headline is that the payroll survey reported an extra 379 thousand new jobs so why did the employment to population ratio rise from 57.5% to only 57.6? Oh yea employment rose by only 67 thousand per the household survey.

    So let’s not celebrate the Biden boom just yet.

  10. dilbert dogbert

    Menzie: Could you set up a Itr section that one could click on if one wanted to read his/her comments all in one place? Sort of like a Itr blog within your blog.

    1. Dr. Dysmalist


      Several commenters have strongly suggested that ltr/Anne start their own blog, to no avail. Plus you’re assuming that they wouldn’t still try to post here rather than the sub-blog. Their history, not just here, suggests otherwise. PGL also has been a witness to it over the years at other blogs. Or Menzie and James would have to change the moderation policy so that ltr/Anne’s comments could be moved to the new section and posted there only, a big step for two genial hosts who started with and wished to keep minimal moderation rules that depended on us to behave properly.

  11. pgl

    Dean Baker in an email after he delved into the BLS details:

    Restaurants and Hotels Lead Employment Gains
    Restaurants added 285,900 jobs in February, with hotels adding another 35,700. This obviously reflects gains in controlling the pandemic, but the two sectors together are still down 2,677,000 from a year ago. The temp sector was another big job gainer, adding 52,700. The sector has added 371,400 jobs since September, an average of 74,300 a month.

    Retail added 41,100 jobs, putting it 362,600 below its year-ago level. Manufacturing added 21,000 jobs in February, but it is still 561,000 jobs below its year-ago level. Construction lost 61,000 jobs, but this was almost certainly due to the bad weather that hit during the reference period. State and local governments laid off another 83,000 workers in February, putting employment in the sector down 1,391,000 since pandemic started.

    1. Dr. Dysmalist

      So, hospitality is hit worst because it’s a high-contact industry group, a sub-sub-suboptimal trait during a pandemic. State and local government is in a strong second place because tax revenues tanked, covid-related expenditures increased, and most of them must balance their budgets. Yet GQP Congresscritters refuse to consider more federal aid for these hardest-hit employers or their erstwhile employees because reasons, none good or even coherent. Someone’s missing something, and I don’t think it’s me.

  12. pgl

    So via an Amendment to the skinny downed CARE Act the Senate did vote on the $15 an hour minimum wage after all. It failed 42-58. Good grief pass CARE now and THEN have a stand alone debate on a minimum wage bill. Now if Republicans kills the standalone bill – use this issue as a 2022 sledge hammer on these pretend populist Republicans.

  13. Barkley Rosser

    I just managed a Zoom seminar with a leading Italian economist, Giovanni Dosi, who spoke on “Unequal societies in normal times, unjust societies in pandemic ones,” which has come out in the Journal of Industrial and Business Economics. it is excellent and makes some points that are both obvious and some not so obvious. It can be accessed by googling the title of the paper.

    1. Barkley Rosser

      A few tidbits, aside from what posted on another thread that is not from the paper is that Italy has just as of today closed all its schools. The pandemic is raging worse and the vaccine rollout is seriously stalled.

      Some bad economic outcomes have been women service workers especially hard hit by lockdowns, and the poor south hit especially hard, both because it is more reliant on tourism than rest of Italy that has more industry, but also because of bureaucratic mismanagement that leads to them not being able to effectively use aid coming from the EU.

      1. baffling

        not sure why europe seems to be having such a difficult time with the vaccine rollout. seems to be a systematic problem there.

        1. Barkley Rosser


          On questioning in the seminar Giovanni agreed that over bureaucratization in the EU is an important reason for the delays there.

  14. ltr

    No doubt I have needed * to be maligned for every comment I have made from the beginning, but I have always been polite and have never mentioned any person critically even if politely and seldom criticizing an idea. Being maligned however necessary is not all that pleasant, but being slow in learning I have come to understand that I must not allow that to influence me and will not else I would be unable to learn what is really important to me.

    * The actual reason from the very beginning of course being a disdain that has for several years been carefully fostered for another people.

  15. ltr

    Please remember that I have never at any time mentioned any of the people who are so intent on demeaning me. I am no doubt ever so foolish generally, but I am always polite.

    1. Baffling

      You fail to understand the difference between demean and criticism. There should be no expectation that you can comment on a public blog and expect no criticism on said blog. That is not realistic. You do not have the right to promote your views on a blog without criticism. Protected speech allows you to express your view. It does NOT permit you to suppress others opinion of your view. That would be one difference between the usa and china you do not seem to appreciate.

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