USC Price Researchers to Examine Economic Consequences of COVID-19

As the COVID-19 outbreak continues, three USC researchers at the National Center for Risk and Economic Analysis of Terrorism Events (CREATE) – Dr. Adam Rose, Dr. Dan Wei and Dr. Terrie Walmsley – are about to embark on a study of the virus’ economic consequences. Their work is sponsored by a sister-center of the Department of Homeland Security’s Office of University Programs: the Center for Accelerating Operational Efficiency.

For more than a decade, researchers at CREATE, a joint research center between the USC Sol Price School of Public Policy and the USC Viterbi School of Engineering, have worked on analyzing various aspects of health threats such as their severity and timing, costs to healthcare, availability of vaccines, avoidance behavior, resilience and economic consequences. It is clear that the coronavirus is affecting every aspect of life worldwide, from social services to the stock market – and insights on its consequences are sure to be valuable in the rebuilding time to come.

Even as we wait for the direct economic impact of this current viral outbreak, past studies by CREATE researchers remain especially timely today, providing invaluable data that policymakers can explore as they take action to mitigate severe consequences.

  • Impacts on human behavior: This relevant experiment using a scenario simulation aimed to learn about public reaction to an escalating flu epidemic. 600 participants in Southern California and the DC Metro Area were shown a series of seven videos describing a hypothetical escalating crisis over a 15-day period. Results suggest that perceived risk, fear and avoidance behavior are lessened when the origin of the epidemic is known and the epidemic is perceived as far away.
  • Public messaging and information campaigns: In an effort to analyze the total economic consequences of potential influenza outbreaks in the U.S., researchers looked at four cases with varied disease severity and presence or absence of vaccinations. Using data from the Centers for Disease Control and general literature, researchers showed that GDP could be negatively affected if resilience and avoidance measures were not taken. Researchers also pointed to a number of actionable items that government policymakers and public health officials can use to help reduce potential economic losses from the outbreaks. For example, promoting avoidance behavior through public messaging and information campaigns may greatly reduce the economic costs of an influenza outbreak at a relatively low cost.
  • Export and import shutdowns: This CREATE analysis simulated a one-year, complete border shutdown of both trade and people to examine potential disruptions to imports and exports, international travel bans to inbound and outbound traffic and a halt of documented and undocumented migrants. Researchers used a macroeconometric forecasting model from Regional Economic Models, Inc. to predict a reduction in GDP of as much as $1.4 trillion measured in 2006 dollars, or about 10.5% of GDP. The model also predicted employment losses of more than 22 million, or more than 12% below base levels.
  • Economic costs of border closures: To simulate the effects of a one-year U.S. border closure, a CREATE Senior Research Fellow, Peter Dixon, used the U.S. Applied General Equilibrium Model (USAGE). His study found that cutting imports by 95% could reduce the U.S. GDP by 48%. However, if bottleneck imports (mainly oil) were exempt and workers accepted real wage cuts, then the GDP reduction would be only 11%.
  • Macroeconomic consequences of an epidemic: Researchers employed a quarterly version of the USAGE model to simulate the effects of a hypothetical H1N1 epidemic in the U.S. The results showed that the macroeconomic consequences of an epidemic reduce international tourism and leisure activities more than productivity, indicating stimulus policies might be an appropriate economic response to a serious epidemic.

While these studies are from years past, CREATE remains a uniquely positioned center to keep an eye on as research about COVID-19’s national and global consequences unfold. Learn more about CREATE’s work by visiting https://create.usc.edu/ and stay up to date on the most timely news from USC Price by checking-in on our news headlines.

 

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