HAIOPOLICY Papers
HAIOPOLICY
The impact of COVID-19 and other complex shocks on heterogeneous
households and businesses, and implied optimal policies
Glenn Magerman (ECARES, ULB and CEPR)
Bart Capéau (ECARES, ULB and KU Leuven)
Hierro Castro (ECARES, ULB)
Astrid Volckaert (VIVES, KU Leuven)
February 2024
Our project aims to provide a detailed examination of the multifaceted impacts of COVID-19 on vulnerable groups in Belgium. Our objective is to identify strategies to shield these groups effectively and improve economic resilience against future shocks. The current paper synthesizes the latest academic and policy research findings pertinent to the BELSPO HAIOPOLICY project. Section 2 describes the consequences of COVID-19 on household outcomes, specifically examining shifts in labor markets, consumption habits, and saving patterns. In Section 3, we pivot to the pandemic's impact on businesses, analyzing firm survival, variations in output, employment trends, and productivity growth. Section 4 provides a review of the federal and regional interventions implemented to mitigate the pandemic's adverse effects. It discusses the budgetary environment of these policies, the main policies on both the employment and firm sides, as well as supra-national global value chain policies. Section 5 provides an overview of the state-of-the-art toolbox of modeling frameworks to quantify the impact of COVID-19 on both the production and consumption sides of the economy. Existing frameworks that model micro-to-macro outcomes mostly rely on either production or consumption heterogeneity. We will build on these frameworks to allow for detailed heterogeneity along regional, socio-economic and firm outcomes, while allowing for spillovers from production to consumption and vice versa through input-output linkages. Section 6 initiates a forward-looking discussion on formulating optimal policy responses to large shocks like COVID-19. This dialogue considers the many interlinked dimensions of heterogeneity, the policy toolbox, and how to start developing a multidimensional approach to policy development. By leveraging unprecedented access to granular data on production and consumption patterns, developing new quantitative frameworks to study the impact of large shocks and potential policies, and building on critical insights from a broad spectrum of stakeholders, this project aims to outline strategies that can guide policymakers in constructing interventions that are as inclusive as they are effective.