EconPol Policy Briefs

EconPol Policy Briefs are short articles providing key findings of policy-related studies and policy implications from recent policy relevant economic research. Grounded in evidence-based insights, the Policy Briefs discuss current topics in economic and fiscal policy within a wide range of specific areas of expertise. By discussing implications of policy scenarios and the impact of economic policies in the face of the rapidly evolving challenges faced by the European economies and their global partners, EconPol Policy Briefs provide a well-founded economic policy advice to European policymakers. Focusing on key messages and policy conclusions, the Policy Briefs transfer expertise from researchers into the public debate and facilitate informed decisions.

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The Economic Costs of the Coronavirus Shutdown for Selected European Countries: A Scenario Calculation

Florian Dorn, Clemens Fuest, Marcell Göttert, Carla Krolage, Stefan Lautenbacher, Robert Lehmann, Sebastian Link, Sascha Möhrle, Andreas Peichl, Magnus Reif, Stefan Sauer, Marc Stöckli, Klaus Wohlrabe, Timo Wollmershäuser

This paper presents scenarios of the shutdown costs in terms of lost value added for Austria, France, Italy, Germany, Spain, Switzerland and UK. The shutdown phase will lead to considerable production losses and large declines in GDP this year. Lasting longer than a month, the losses within the EU quickly reach dimensions well beyond the growth slump of previous recessions or natural disasters. Shutdown costs justify almost every conceivable investment in health policy measures which allow to combine a resumption of production with further fight against the epidemic.

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Group Testing Against Covid-19

Christian Gollier (EconPol Europe, Toulouse School of Economics University of Toulouse- Capitole), Olivier Gossner (CNRS – CREST, Ecole Polytechnique, London School of Economics)

Testing for Covid-19 is a bottleneck that we face in front of the pandemic. Test production is currently much below what is necessary for mass testing strategies which are required in order to control the pandemic while letting people go back to work. In this paper, Christian Gollier (EconPol Europe, Toulouse School of Economics University of Toulouse- Capitole) and Olivier Gossner (CNRS – CREST, Ecole Polytechnique, London School of Economics) show how group testing can be optimized in three applications to multiply the efficiency of tests against Covid-19: Estimating virus prevalence to measure the evolution of the pandemic; bringing negative groups back to work to exit the current lockdown; and testing for individual infectious status to treat sick people. 

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Portugal’s GDP, a Note on the 2020 Unknowns

António Afonso (EconPol Europe, Lisbon School of Economics and Management of the Universidade de Lisboa)

António Afonso (EconPol Europe, Lisbon School of Economics and Management of the Universidade de Lisboa) has estimated the real growth rate of GDP in Portugal in 2020 and predicts a budget deficit of around 3% or 4% of GDP, implying a break and not a fiscal regime switch. Of particular relevance, he says, is private consumption and investment, with households cutting spending significantly and an increase in government spending necessary to cover the lack of domestic demand.

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Wage Rigidities and Old-Age Unemployment

Martin Kerndler (TU Wien), Michael Reiter (IHS Vienna, NYU Abu Dhabi, EconPol Europe)

Wage smoothing is beneficial for firms and workers, but wage rigidities can lead to bilaterally inefficient separations. By comparing the impact of four policy measures regarding their impact on welfare, output and government expenditures, Martin Kerndler (TU Wien) and Michael Reiter (IHS Vienna, NYU Abu Dhabi, EconPol Europe) have identified a reasonable policy mix to counter the negative employment effects of wage rigidities. 
 

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The Economic Costs of the Coronavirus Shutdown for Germany: A Scenario Calculation

Florian Dorn, Clemens Fuest, Marcell Göttert, Carla Krolage, Stefan Lautenbacher, Sebastian Link, Andreas Peichl, Magnus Reif, Stefan Sauer, Marc Stöckli, Klaus Wohlrabe, Timo Wollmershäuser

This EconPol policy brief, using figures from the ifo Institute, calculates potential costs of coronavirus to the German economy of up to 729 billion, with up to 1.8 million jobs cut and six million workers affected by lower hours - however it stresses that the aim of any action must be to shorten the partial shutdown of the economy without compromising the fight against the epidemic, with strategies that combine a resumption of production with further containment of the epidemic.

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