Development in the Time of The Coronavirus Pandemic: A Research Agenda by Pinelopi Goldberg

welcome everyone to dartmouth college virtually um in the northeast university development consortium conference um naudc is the largest conference in development economics in the world and this year is going to be our largest any udc ever over the next two days the dartmouth community and checked this morning we're now above 900 registered attendees we'll have the opportunity to engage with the frontier of research and development economics 234 original research papers presented from every continent but that ever elusive antarctica links to listen to all 60 conference parallel sessions are on the conference website all you'll have to do is just click on a session title and that will take you into the zoom webinar for the session so that's on the schedule page of the website and as registered attendees know we've also got a parallel space running throughout the conference where participants will have the opportunity to engage and discuss uh informally in greater depth um in a in an eight-bit world um that we've developed for the conference um i'm eric edmonds i'm a professor in economics here at dartmouth paul novosad who's also in the economics department and i are extremely grateful to have all the people that have helped us put together this meeting there's been more than 40 faculty from any udc member institutions including many here at dartmouth who helped select papers from the more than 600 submissions we received thank you so much 60 faculty have volunteered their time to chair the 60 parallel sessions that are running over the next two days thank you putting together a conference of this size is an enormous undertaking and the staff of the john sloan dickey center for international understanding at dartmouth college have done everything to make this happen we are really grateful for both the financial support from the dickey center and the time and attention of its staff especially uh tom kinden um sharon chabot st martin and judith um van reen and jackson thank you so much the challenges and opportunities of globalization dartmouth cluster initiative is making today's kickoff keynote possible we really appreciate that and their support and we really appreciate the opportunity to begin this conference with the discussion of development in the time of covid i'm with penny goldberg from yale university and to introduce penny goldberg it's my privilege to introduce you to um certainly my favorite of of her former students which is professor nina pouchnick who is the knee house family professor in international studies and the chair of the department of economics at dartmouth college nina thank you eric and welcome to everyone it's amazing to see that we have 200 participants joining us from all over the world it is my honor to introduce professor penny goldberg she is currently the illegal professor of economics at yale university goldberg has had a distinguished career as a researcher she's drawn to tackling policy-relevant questions in international economics and development her research has earned her many academic honors she's a member of national academy of sciences the american academy of arts and sciences she's a recipient of sloan foundation fellowship the guggenheim fellowship and the bodosaki prize in social sciences but what's the most impressive virtue of goldberg is that she's an amazing role model for young economists in 2000 just 20 years ago she was the first woman to receive tenure at the department of economics at yale from 2007 to 2011 she served as the first female editor-in-chief of the american economic review one of the most prestigious and influential journals in economics she is currently president-elect of the econometric society and has previously served as vice president of the american economic association in all these roles goldberg is known for her open-mindedness about using a variety of methodological approaches to find answers to important questions she builds bridges and makes connections across fields of economics and this approach that leads to rich nuanced policy relevant discoveries throughout her career goldberg has also been a role model for how to bring academic rigor to policy making throughout her studies she has examined some of the most complex issues that affect developing countries including the determinants and effects of trade policy the relationship between international trade and inequality and poverty and issues related to intellectual property rights protection in developing countries most recently she has examined the resurgence of protectionism in the united states and its consequences not just for the united states but globally from 2018 to march 2020 goldberg served as the chief economist of the world bank group there she supervised the world development report which studied the relationship between economic development and global production networks she was also involved in the bank's efforts to improve the measurement of human capital in developing countries as well as the measurement of legal discrimination against women for all these reasons goldberg is a perfect speaker for the inaugural distinguished lecture on globalization in the 2020 nudc welcome keynote before i hand the floor to professor goldberg i would like to encourage you to pose questions for her in q a i will use these questions in a discussion that will follow her talk welcome uh penny and the floor is yours thank you very much nina for this very kind and very generous introduction i i'm truly honored to be giving a keynote in this important conference uh thank you very much for inviting me and perhaps more importantly thank you for organizing the conference i have to show you among my i don't know what my most important accomplishment is but what i can say with certainty is that for me the most enjoyment the most enjoyable the most important part of my work has always been interacting with students interacting with graduate students and having students like nina and the many others i have advised is what i consider to be perhaps our most important mission it's also something that keeps us going when times are tough like uh like in the past year so i'm particularly happy to be giving this keynote and i'm particularly happy to be giving it uh having been invited by one of my best former students um so this is a keynote organized by the center of globalization and uh when i thought about what topic to talk about initially my inclination was to choose something other than the coronavirus pandemic because i'm sure that by now there is fatigue and most of us are a bit tired hearing about it however it's i find it impossible to think about development going forward or globalization without taking the current crisis the condemning into account so with that in mind i decided to talk about how i see development going forward given the pandemic we experienced in the past year and will probably experience in the coming year at least covet 19 is in my view the the most severe global shock that we have experienced since world war ii it has certainly changed the way we do business the way we interact with each other and i'm sure it will change these things also going forward as i already said there's still a lot we don't know there's a lot we learned in the past year but there are still many questions that um we don't have the answers uh for so uh in the following i i decided to use this talk to organize my thoughts to structure a little bit my thoughts um around covet 19 and and at least in the process some of the questions i would like to have to have the answers to some of these questions are going to be specific to covet 19 but i think many of these questions are more general and and might become more important going forward if epidemics or pandemics become more frequent as some epidemiologists have predicted so uh let me start by giving some overview a brief overview of uh covet 19 as it has affected developing countries and here i have to always start with the important disclaimer important caveat that when we talk about developing economies these economies consist of an incredibly heterogeneous set of countries they include countries like peru that has been devastated by the pandemic and countries like vietnam where that was hardly touched by coronavirus they include countries like china and countries like somalia so so the range of countries is vast so the usual disclaimer applies i will use the term to to simply refer to countries that have fewer resources than advanced economies so when we think about the covered 19 in the context of developing economies i think there are two taxonomies that may be helpful one is in terms of the nature of the shock and there we can think of kobe 19 as representing a health shock that was the primary shock but we can also think of it as being an economic shock and the economic shock in turn has many different components the first one is that it was a simultaneous supply and demand shock second it was a financial shock it affected markets all over the world um and third it was a commodity price shock it certainly affected the price of oil but it also affected the prices of many other commodities and as you can see in the slides i put the financial shock and commodity private shock in red and this is because i think even though these components are present in all countries i think the last two could potentially have very severe consequences for developing countries for reasons that will become clear in a moment um a different taxonomy will distinguish between direct and indirect effects and in terms of direct effects i think primarily of the direct effects the health effects of copic 19 by indirect effects i mean the effects that arise from the fact that for in order for countries to uh contain the spread of the virus they imposed restrictions that affected the economy uh and there is a third type of effect that arises from international speed lovers so even if you consider a country that uh was not affected directly by covert 19 that did not have to implement any trusted policies to contain the virus still this country is going to be affected by what is going on in the rest of the world and again i i uh put this in right because i think this component is particularly uh important uh for developing countries and especially small developing countries so with that in mind let me briefly talk about what has been done so far in the economics research community one thing that has been striking about the current crisis is that the research the economics research community was immediately mobilized and um i think it's jim stock who said this this contrasts with the experience in the past usually economists wait until we have enough data um to to to to do our analysis and this is because we place great value on robust analysis and robust predictions and sometimes by the time we are comfortable uh making any statements the crisis is over this has not happened this time so economists jump right in and i think this is this is justified because there has never been a shock as big as uh the kovit 19 uh crisis and it was hard for all of us to think about anything else ignoring the pandemic so uh that happened so far two types of research um broadly speaking one is the research that has been conducted conducted by modelers and uh these models within economics focused mostly on epidemiological models pointing out that many of these models have in some sense the same structure as quantitative macro models um they pointed out that the very simple sir model that epidemiologist used at the very beginning of the pandemic boils down to just one parameter the famous are not um the very simple the very naive version of these models applied a single are not for the entire for the global population and one of the many insights of economies was that uh first of all the arnold is heterogeneous it's heterogeneous within populations depending on many factors depending on age depending on demographics as i will show you in a moment i would argue that there is also enormous heterogeneity across countries globally and second very importantly they are not these endogenous so it depends on economic and social behavior which is affected by uh by our strategies to contain the virus um on the empirical side um again it's very hard to do research when we don't have data but what many economists did is conducted real-time surveys based on using phones using whatever technology was available to assess the effects of covet 19 and also the effects of many policy responses for example cash transfers in order to aid those affected and i i won't even attempt to cite the many people and the many institutions that conducted real-time surveys they range from the world bank to many think tanks and many individual researchers across universities all over the world this this research this real time surveys collectively document enormous pain real pain in low income countries but still going forward i think the question for many of us is going to be how persistent are these effects perhaps it's not surprising that that many countries many communities experience significant pain but how persistent are they and what that what are the aggregate implications going forward so uh very generally speaking there is a lot of research that going forward could provide a more complete more accurate picture of what has happened and what the long term effects are going to be and in the process we can perhaps also inform model parameters that can one day lead to better modeling and better recommendations in the future i think it's fair to say that everyone was unprepared for what happened the last pandemic was more than 100 years ago but many predict that pandemics are going to to become more frequent and if that's the case it might be important to understand what the process of infection what the process of diffusion of a virus is so let me give you a brief road map for the firm remaining uh talk i will start by talking a little bit about what what has happened in developing countries so far focusing first on the public health effects um and there i'm going to to draw heavily on a paper i prepared for the brookings papers and economic activity this is joint work with tristan reed of the world bank um i'll talk then a little bit about the policy response um financial markets how they were affected in developing countries and then i will focus on the long run effects and questions uh touching on issues such as human capital poverty and inequality global supply chains technology adoption climate change and institutions so let me start with the public health effects first uh the first other effects that we're concerned about so in general the expectation in the in the early months of 2020 was that developing countries would be hit much harder than advanced economies and uh if you ask me whether this prediction i was part of of those who said that things seemed utterly uh hopeless for developing countries if you ask me what where we stand right now i would say that this expectation turned out to be correct in latin america but not in asia or africa so in fact i would go as far as saying that on average and the word average here is important low-income countries fared better than higher income countries and the question is why so let me um you know set the stage by by laying out some of the arguments that people used in the early months to justify optimism or pessimists regarding the fate of developing countries reasons for optimism include the age distribution in developing countries so in many low income countries people are much younger one example i often mention is the example of niger where the median age is 15 years 1-5 so in such a country you may be less concerned about an epidemic that affects primarily not exclusively but primarily older people obesity uh obesity has also been identified as an important risk factor and while in within advanced countries the the lower income people uh this those who are so so economically disadvantaged tend to be obese uh in across the world the opposite is true so we see less obesity in the very poor countries uh people hypothesized that weather could be a factor that warm humid climates would uh contribute to a slower spread of the virus and finally and importantly low connectivity low connectivity has always been a main a severe challenge for developing countries especially in africa but in this particular case it seemed a blessing because at the minimum it implied that they had more time before the wires arrived and perhaps they could use this time not to get ready in the sense of getting ventilators that was not an option but perhaps taking measures that would contain the spread of the virus on the other hand you had important reasons for pessimism first and foremost the low capacity of healthcare systems uh there's a reason developing countries are called developing countries they have fewer resources and on top of that uh the many developing countries especially the cities in developing countries are characterized by conditions that would uh would suggest higher spread and higher mortality overcrowding urban poverty multi-generational households which meant that it might be very hard to separate the elderly from the young but all together implies that lockdowns would be less effective so on balance it was not clear which way it would go so so what happened so this graph by the way shows you what what the different risk factors look like so it is it puts um numbers and parts and bars on what i just said uh for how income countries for example you can see the the percentage of population over 70 is on average 10.6 in low-income countries uh this number is 1.8 okay so there's a very big difference with obesity let me just point out that there is a very small difference there is very little difference between upper middle income countries and high income countries but you can contrast those with low income countries so these are all the reasons that led to optimism if you uh i'm sorry to to optimism right uh if you look at the public health response okay there this is something that i haven't mentioned but but uh uh i'm planning to to cover it more extensively when i talk about the policy response uh in many developing countries policymakers countries reacted very fast so if you compute how many days did it take before the country took some action to contain the virus and this action could be something as simple as taking people's temperature at the airport when they enter the country in low-income countries they took action approximately two months before the virus before the first death in the country in high-income countries um the the time interval was much shorter and finally if you look at the positive test ratio and the positive test ratio so is the ratio how many positive cases uh do you have relative to the total cases in the country so this is often used as a form as a measure of testing capacity so in in many low-income countries this ratio is very low and and i'm not going to interpret that in a causal way right obviously if you have very few very few covered cases this test ratio is going to be small but what this suggests is that whatever tests they have they are sufficient to capture the the cases that they may have in upper middle income countries this is where this ratio is highest so think here of cases like peru where the testing is clearly not sufficient and then in high-income countries again it's higher so what happened let me come back to this question so this graph is a graph that we created with tristan uh starting in may and let me tell you what it it shows on the horizontal axis you have the dates you know from february 1st when the virus started spreading outside china and then on the vertical axis you have the total deaths attributed to cover with 19 per million people so it's uh it's it's all adjusted for population and the the lines the curves show the deaths per million by income group um as per the world bank classification so the red line the one on top shows the high income countries the next line the brown one shows the high income actually the upper middle income countries so this graph excludes china with china it would be much lower china is the yellow line at the bottom as you can see it's very close to zero debts per million in china are three the purple line shows the lower middle income countries so countries like india go here and then um the blue line at the very bottom shows the low income countries right so what is striking in this graph is that the high income countries followed by the upper middle income countries fared much worse in terms of debts um with britain we started producing this graph end of may so back then we were here and many when many people when they first saw this graph they said it was just a matter of time so we've been updating this graph month after month and as you can see the some of the patterns remain the difference between high income countries and upper middle income countries is closing and that reflects the experience in latin america so latin america is here including peru including brazil including mexico so this difference is narrowing but nevertheless it remains and now we have a second wave in europe so the cases here are rising again in low-income countries the pattern has not changed so deals per million are very low india as i'm sure you all know has experienced a major uh uh surge in cases and deaths but still on a per capita base uh basis it's doing much better than countries in europe or countries in america okay so uh what is striking i think about these patterns is both that the levels are different but perhaps more importantly than that the shape of the curve is very different across different parts of the income distribution now this is a very coarse classification as we all know you even though we distinguish between countries at different uh per capita income level there are still big differences within each group another way to show this relationship is to show the relationship between gdp per capita and coffee deaths per million okay so uh the u.s is normalized to be one and what you see here is two things first there is undeniably there is a positive relationship between uh gdp per capita and debts so the richer you are as a country the more debts you experience that said for any income level pick any income level you want there is enormous variation there is enormous variance around this number and of course this speaks to the fact that it's still so much we don't understand about how why different countries have experienced this virus so differently if you think about high-income countries you have germany right next to belgium in germany the debts per capita are around 120 in belgium it's like peru it's over 1 thousand at this point um in uh uh it's very hard to understand what drives these differences um so uh before i go on let me give you some concrete numbers so that you know what what what the magnitudes are approximately again these are numbers that change daily the numbers you see today are taken from november 5th so these are the numbers as of yesterday and this is just to give you a sense of how big the differences are across different countries so if you focus on europe so deaths per million in in the uk are 708 in spain 823 as i mentioned in belgium that this number is above 1000 now germany is doing very is over performing uh it's one of the countries that uh had the best experience so far they have managed to contain this number to 133. coming to let me jump to america to the americas the usa is at 7 26 right now um mexico brazil peru has one of the highest numbers in the world uh the most countries here are above 700. now this is to be contrasted with what happened in asia where these numbers are much smaller uh in vietnam it's 0.4 but you know even in india that experience this surge uh this number is 90. um in turkey it's 126. and then finally if you come to africa so south africa is the country with by far with the highest debts per capita 330 the next one that i didn't show here is libya with 130 and then countries populous countries like nigeria or angola have essentially have had no covet this is not to minimize uh the importance of the disease but i think it's fair to say that if you compare nigeria and angola to the us we are talking about big differences orders of magnitude that that that are really puzzling so what explains these differences um so let me let me suggest some explanation that i think this is where future research uh may be very productive so the first thing that comes to mind is miss measurement right so mismanagement could arise either because countries low-income countries don't have the statistical capacity to capture deaths or as some people have postulated uh from from manipulation of data there is no question that there is mismeasurement and we know that for sure because periodically countries adjust their statistics they report they find deaths that they have not reported before and then you see the spikes in the data so we know for sure from revisions of current numbers that there is mismeasurement but it's very hard to explain these big differences not only in the levels but also in the slopes of the curves uh on based on this measurement alone um i would also argue that death statistics statistics are pretty reliable that that it's very hard to hide depth especially in this age of social media in this age where many non-profits are present in developing countries we saw in many developing countries no debts reported until they became really a problem if you think about peru for a while there were no deaths uh then when uh carved hit the country hard we saw that that's being reported the same the same thing in india so while i there's no question that there is some mismeasurement it's very hard to explain these magnitudes the difference in magnitudes and slopes based on measurement alone that said to the extent that we really want to understand what drives differences across countries i think it would be important going forward to have an accurate measurement of what happened and one way to do that is by using excess deaths now this is not without problems so as many of you probably know the new york times or the economist have been reporting such excess debts for particular countries or for particular cities but it's much harder to compute them for the for the global economy for for all countries and uh they're not without problems you know partly because the data is very uh scarce and also because it's hard to attribute excess debts to covet 19 alone so just to mention an interesting fact from my work with tristan when we were doing this work back in may or june the exit deaths in south africa were negative actually so these are the excess deaths relative to last year and this was at the period where they were we knew that there were already positive covered 19 deaths so they were in the official statistics they were covered 19 debts yet if you reported the access that the excess debts you would find that there were fewer debts this year compared to last year and people hypothesized that part of the reason for this was that as a result of the lockdown measures people stayed home there was less drinking and that saved lives so on net you had fewer deaths than before so you can see that this calculation is tricky but nevertheless i think going forward if we had more reliable measures of the excess deaths in the months where the case is peaked then we would have some estimate of how many debts we can attribute to copic 19 and then perhaps more interestingly we could also uh conduct these calculations for many months going forward or even here and see what the long run effect is and that would allow us to capture some of the indirect effects that people hypothesized are very important especially in developing countries so while everyone is focused on carbon 19 and lockdowns perhaps there are other health conditions that that are being neglected and maybe these also lead to death uh we would be able to capture such effects in the long run by looking at excess death rates so i think this is this is something that can be done uh in the future this kind of research is already going on in the united states based on county level data but i think it would be much more interesting to do it in developing countries where the data challenges are more severe that still leaves us with the question what drives these big cross-country differences i this is those of you who know my research you probably know i'm not a cross-country person i haven't focused my research on cross-country comparisons but in this particular case it's it's very hard to um evade the question of why why have countries have had such a difference in the experience and their experience with kobe 19. so again with a word with a work with tristan uh for the broken papers of economic activity we we identify some factors that are important in explaining the cross-country differences among them age obesity and population density and i should mention that these factors have been robust uh across all specifications we have considered uh and across time and no matter what you do they're already there so this um this health covariates by themselves so agent obesity actually can explain to a certain extent why low-income countries have done better population density is quite interesting so we we have looked at the population density in major urban centers and it has enormous explanatory power as you would expect but it doesn't explain why developing countries have done better by developing countries i've always been here in this context the low income countries in africa indonesia so i don't mean latin america but in in many parts of the world you have mega cities so you have uh cities like lagos or um or jakarta where the population density is very high and so in principle this should make developing countries worse off and yet despite the importance the explanatory power the population density has uh we still find that developing countries did better so so in short what would have found in our work is that these health covariates have very high explanatory power but they cannot be the full story so they cannot fully explain why we see these huge differences across countries what's the role of policy um we've investigated our work i won't show you regressions here because we don't have the time for it but we we investigated the effect of many policies including drastic lockdowns the time that it took for policy makers to implement these policies compliance as measured by google mobility reports uh needless to say that every time you you use these measures you lose many countries because for many countries these reports are not available but for the countries for which these measures were available we found the results not to be robust so early on we found when we were conducting this work in june we're finding very strong evidence that policies matter then in july the effect of policies had disappeared now we again when we run this yesterday we found that again policy may explain cross-country differences so those countries that acted fast did better i think the issue with this type of work is that the policy measures we use are just to aggregate and they don't capture the relevant implementation details and here in this context implementation was everything so germany eventually had a lockdown and the uk had a lockdown for the way these lockdowns were implemented or the u.s had a lockdown but the way this lockdown was implemented was very different and you know if there was one one message one very important message from last year's nobel prize which was in development so um the the ban energy to flow kramer nobel prize was at implementation matters it matters when we we uh disperse aid in developing countries but it also matters when we try to contain the spread of the virus in kobe 19. so again i think there is room for much more detailed work based on micro data based on data that focus on particular countries and particular communities that tries to shed light the question why did some policies work and others did not and finally the other explanation that i think is key here and mainly to very interesting research agendas is that we have heterogeneous are not that could explain the different curves across developing countries so what i mean by that is um if you remember the graph it's not just that low-income countries cut lower debts than high-income countries it's just that the pattern of spread the pattern of diffusion was very different and that raises the question is the way that people in developing countries interact with each other different what is different what what is different between a low income in terms of interaction what is the difference the kind of difference that could give rise to this type of curse uh what is the role of family and social networks so that the field of network economics has exploded in development economics in the last few years there is a lot of work on networks most of the work on networks to date has focused on diffusion of knowledge so if we have a new technology how do we make sure that people in a village in a community developing country learn about it here what i'm suggesting is a different type of question we have a virus how does the virus spread across a network and conversely what can we do to contain the spread of the virus so how can we avoid contagion this is a question that has been to a certain extent posed in finance but not in this context to my knowledge so to summarize i think there are many research questions here the general question is to understand the spatial patterns the differences in the pandemics effects this question is interesting also for advanced countries but i think it's particularly interesting for developing countries and very specific questions improve on measurement explore the effects of health covariates and policies but at a very micro level at the level of states or counties or cities or zip codes and then model the role of social interactions and developments and try to to give an answer to the question of what kind of kind of interactions could generate the curves that we just showed you and why are this culture different across countries and eventually i think what this work would do is it would lead to better perhaps developing countries specific estimates of are not that could potentially also inform better policy responses uh i can only hope that the covet pandemic is is going to come to an end next year but again if pandemics become more frequent going forward it would be important to understand how the the patterns may be different in different countries now let me come to the policy uh response i think there are many interesting questions here so so before in the previous slide i focused on the effects of very specific policies and i suggested investigations at the micro level of how these policies have played out taking also compliance into account there is another question which regards the the origins of these policies the political economy of policy responses so why was the the policy response across different countries even within countries across states or municipalities why was it so different there's already some work in this area again i won't even attempt to cite it because there are many people uh working working on these issues um but i think it's really a first or order question and uh and also very interesting intellectually a very interesting question um i i think it also raises a more uh general and i would say almost philosophical questions that might be worth to consider um the general question in my mind is what explains these worldwide this drastic worldwide response that we've seen the response was truly unprecedented what makes it unprecedented is that for the very first time countries with very few exceptions agreed to shut down their economies to protect lives uh it's the coronavirus pandemic was not the first epidemic it's not even the first pandemic but to my knowledge is the very first time in history that the whole world uh fortunately not in a synchronized fashion but uh with a delay of a few months decided to shut down to protect lives so what explains this enormously uh big response so i think there are many explanations and some of them are more cynical than others so so let me start with a more cynical if you want one is that there was high uncertainty at least in the first months everyone felt at risk um and therefore um we decided to go for a very drastic response to feel safe that explains perhaps what happened in march or april it's harder to justify what's happening in europe right now but again many countries are shutting down uh there are questions about intergenerational inequality so we talk a lot about inequality these days but we never really talk about intergenerational inequality and this is a component of inequality a form of inequality that may become relevant because of the pandemic we all know that that no one is completely safe from the virus but probabilistically speaking the chance that you are severely affected goes up with age and so one possibility is that the decision makers tend to be older and they did not fully take the welfare of younger generations into account um a third possibility is risk aversion by policy makers especially in settings with high accountability so uh if you are up for for election or if you have um if you are a constituency that is going to hold you accountable for the deaths in the country you may play it safe the fourth possibility that the game has been suggested in the literature is there was elite capture uh even though copy 19 had devastating effects as always the effects were unequal there were also parts of the economy that benefited so in the us the big tech was the big winner and and uh apart from the big tag for all of us those of us who can work remotely uh those of us who have phds uh those of us who have computers we would we could maintain our productivity those who did not have this option uh were devastated so there could be some form of some component some degree of elite capture by those who ended up gaining a lot and let me also suggest the final explanation which i think if it's not the explanation i think it it it hasn't merit is that as per capita incomes have increased uh worldwide we place much higher value on life and health than economic prosperity so in other words countries today even as our behavior has revealed even the low-income country place high value on objectives other than growth and other than economic prosperities and again what has been puzzling about that is that this seems to also be the case in countries with very low incomes again the reason i i i think this deserves some serious consideration is if you think about the last time we had a pandemic this was more than 100 years ago that was the spanish flu the reason it was called the spanish flu it's not because it was more severe in spain is because spain was not participating in world war one so therefore people there noticed the deaths due to the flu the rest of the world the world that was affected by the by the flu at the time was devastated by world war one so that the deaths due to the war was so uh severe and and so numerous that the flu was perhaps not the the most important priority at the time and they didn't even notice it we're in a very different place these days and this is perhaps uh you know the always the only silver lining when we consider the current situation that that we are rich enough that we can actually um that we can actually consider what what the value of human life is and i i in my view to the extent that we we go with this view that uh that policies reflect not just the objectives of particular parts of uh the economy but actually the general preferences of the constituencies there's a lot of information that we can use uh we can apply to many other questions so this information about what our preferences are there is information about the value we place on human life there is information about how we trade of growth against other objectives including life including the life of others so how we value the life of of the elderly or those who are more vulnerable as opposed to just our own lives and finally there is also information about how we are expected to manage tail risks in the future and you know one can can uh sit on panels and make these points but i think it would be very useful and that's where economists have an advantage to to try to address these questions within a structured framework um and also ask in the process the question how can how do the these answers vary by stage of development do do all countries give the same answers uh to these questions i think and i'll come to that a little bit later if i have time is that that apart from the fact that these questions are interesting from intellectual point of view they also have important implications for things like climate change when we think about our response to climate change and one of the big questions there has been should we be treating developing countries different differently from advanced countries these kind of questions bear a lot of weight now let me switch gears and talk about something uh very different um namely what the effects of the pandemic have been in financial markets and here i will focus on developing countries so i if you remember i put this in red initially and the reason is that many feared that um that the effects on financial markets would be devastating for developing countries so let me um tell you let me show you in pictures what happened and again i assume many of you know that this is a well-known graph that shows what happened to capital flows out of developing countries in march so in march there was a massive outflow these are non-resident purchases of vm stocks and bonds there was a massive massive outflow out of developing countries out of emerging markets and this was truly unprecedented so uh on the horizontal axis you can see what these flows have looked uh have looked like since 2010 nothing compares to what happened in march uh 2020 at that point there was panic in the markets because many of developing countries were predicted to face serious solvency problems it turned out and that that's where um i think tristan and i are more optimistic than or were more optimistic at the time than many others uh we pointed out that uh if you actually took a more broad view of capital flows if you included net capital flows to major emerging markets then the picture looked bleak there is no question about that but not as bleak as thought it was certainly not unprecedented so this is what happened in march this is what happened during the big commodity price shock in 2015 and moreover we pointed out that all these traced very closely what was happening to the price of oil relatedly if you actually look at the accumulated net flows out of developing countries uh this black line you see here is saudi arabia so saudi arabia is one of the countries that experience one of the largest capital outflows well this is highly correlated with uh oil oil production for many other countries actually the net flow the net flow change was not that big and in fact for many countries the trends were not reversed so for vietnam or indonesia the trends were not reversed so so the picture was bleak but not as bleak as one predicted there was general concern that the borrowing costs would go up for developing countries and again they did go up so that's again what happened in march okay where they spiked uh these are the sovereign spreads then um the the the imf and the world bank of the g20 announced that that forbearance so that's the dssi initiative that uh suspends service uh debt service payments uh for uh for a while for the law for for low-income countries or gives countries the option to apply for suspension so once they so so so uh once the these institutions announce this initiative what's interesting is that the spreads went up again and this is partly because many thought that there would be a moral hazard problem and uh private investors would consider these to be to be assigned but they were more likely to be repaid that the credit risk was going up but after this initial spike uh spread started going down again and certainly they have not returned to pre-covered levels by now they're still very high borrowing costs for developing countries are still high very high but they're not as high as in march so things again look a little a little better than initially um initially expected uh what about commodity prices that's the other you know if you remember that's the other uh economic effect that was expected to be truly devastating for developing countries uh we saw a huge decline in oil prices in march uh that was partly because of kobe but to remind you this was also partly because of the breakdown in collusion between russia and saudi arabia so and again this breakdown of collusion could could have been triggered by the pandemic but i would consider it also a distinct shock so this is the big collapse of oil prices and this of course affected oil exporting developing countries and many other commodity prices were going down at the same time oil prices have not recovered oil prices are still down as we would expect because worldwide demand is down but still they're not as low as they used to be regarding other commodity prices many of them have recovered including copper including sugar so again the picture is not great but it's not as bleak as one expected so preliminary conclusion again is at the beginning the the picture in the financial markets was truly scary for developing countries and uh everyone was expecting a major debt crisis in this crowd in this in this uh in this economies this did not happen that's with the health effects the financial and the financial side the effects ended up being less severe than expected and the question is again why um there again there i think there are many interesting research questions here and uh to the extent that that something good happened in this case so the health effects ended up less severe than we thought and also the financial effects and the blessing here than we thought it's it's a very interesting question to us so what did we do right here and so many would credit the monetary policy in the us and europe the very aggressive policy with um with reversing the trend we're reversing the capital flows out of developing countries and i think this has certainly been important stabilizing markets but i think there are also other factors in play here and the first one is that the commodity price shocks the body price shocks have been partially reversed not completely but the picture is not as bleak as originally thought and also that the expectations of the health devastation in developing countries did not materialize so the fact that many developing countries managed to to to to keep the the the covet spread and deaths under control has also benefited them on the financial side again there's enormous heterogeneity within this group not all countries are out of the woods but but many are doing better than expected that said there are still many countries that are in that distress or at risk of that distress again with a work with tristan we point out that the majority of these countries almost all of these countries were in that distress even before the covert crisis so it's a very serious situation but but it cannot be attributed to copy 19 alone the more general question again uh in this context i think is what explains capital flows and uh there is a lot of research on this area naturally already uh but this particular shock the covered 19 shock and the policy response gives us additional data points to to try to uh investigate this question the question is what is the role of interest rates what's the role of yields what's the role of macro expectations or the role of commodity prices and uh in this context i would also like to point out as i to stress as i did before that despite the general trends what is interesting in this context is that flows to individual countries for example indonesia or vietnam have not been reversed uh postcode 19. now let me come finally to the long run pictures so the long run effects and questions and these are i think effects that have that are predominantly due to the global policy response um so so the general problem is that that we have all redefined our priorities we have redefined our priorities in research and policy makers have redefined their priorities and policy and their long-term policy agendas have shifted and i think perhaps the biggest challenge in my mind is not what's what's happening in developing countries but what is not happening there at the same time existing problems and trends have been exacerbated so let me um highlight some of the issues in different areas as i see them let's start with human capital because the effects on kovi 19 of human capital are some of the biggest effects in my mind we all know that that uh in their uh in the attempt to contain the spread of the virus almost all countries close schools some of them temporarily some of them on one or more or more permanent basis and we all hope that one day schools will reopen but the general question is to what extent will this hopefully temporary school closing so this hopefully uh transitory shock to what extent will it have long-run persistent defense on human capital in advanced economies we are not too worried about that we are worried about the inequalities that school closings may generate but i think in developing countries is a very different story so in the area of education in some countries we have public school closures for example in kenya has cancelled the school year for the entire year going forward that raises many questions for it that we don't worry about in richer countries for example will the kids come back to school afterwards what are the effects on girls education there is some very interesting work by orianna bantierra and several co-authors on the effects of the ebola epidemic in west africa and sierra leone in particular where they show that what happened is when they school when they close schools students dropped out including girls when they reopened the schools the girls didn't come back and we took special interventions to make them come come back so um the question is to what extent will these school closures that with you as temporary have effects on girls education and also on other marginalized groups another question is many countries in uh in developing economies just like in the us or in europe have switched to online learning um to what extent can online learning in this country substitute for uh for uh in-person education there's actually some interesting work uh going on there there's there were some very useful interventions on uh botswana i know there's a paper presented um in in the conference by non-angriest and co-authors that that showed that that some online interventions were actually very successful in alleviating this problem and so there is there are many interesting mechanism design questions there what kind of interventions can alleviate all these problems that we see as a result of school closures in the domain of health there are equally important questions there have been many disruptions in routine health care lapses in vaccinations uh decline in child and maternal care again in advanced economies we we think of many of these issues as being only temporary so you can get your vaccination this month maybe you can wait a few months later i think it's a very different story in developing countries where it took in many in many cases it took intense informational campaigns to convince people to get vaccinated and again the question is just like with school closures are people who are postponing vaccinations are they going to eventually get vaccinated um what about nutritional needs there has been a lot of evidence based on this real-time service that in many cases uh people expressed concerns about food security that that many were not getting nutritional meals what are the long run effects of all these interventions uh of all these uh problems um and again we have plenty of evidence about the shoulder and effects we know based on all these real-time surveys that these effects have been very severe in the short run uh but the interesting question is are they going to translate to long-run effects and and this is i think this this should be an important research agenda for developing countries going forward more generally you can generalize all these questions to the more general question of how poverty and inequality will be affected and i already mentioned the effects that that can happen through human capital there are additional effects that come through employment so we know from the financial crisis in the us that that the financial crisis had also long-run effects through job loss and through the loss of income at the minimum you may lose skills you may lose connections you may lose the potential to make good matches during that time now what makes developing countries different is that they have a very large informal sector and in this particular setting it's not clear whether this is an advantage or a disadvantage in the short run for the purpose of social protection the informal sector was a big challenge because it made it much harder for policy makers to reach those in need but on the other hand one could make the argument that as the as economists start recovering having a sector that's very flexible may prove an advantage and it may become much easier for people to reconnect to jobs we don't know if this is true again i think this is a very interesting research question going forward now many questions regarding differential sector exposure just as in the us and in advanced economies services and tourism have been very severely affected commodity markets again qualities have been affected in developing countries this is likely to affect different developing countries differently and finally i will mention gender uh the effects on gender are going to also be very important in my view for various reasons i already mentioned the effects to human capital and the potential effects that school closures may have on long-term education for girls there is the sector the sectoral exposure women are predominantly employed in the service sector and the service sector has been hit particularly hard in this crisis there is the fact that in developing countries we have a lot of work from home and informality and again women are overrepresented in these sectors how what are the implications uh for women through this channel and finally i think this is important there's also the fact that that the current pandemic has led to um a halt of reforms um uh nina mentioned at the beginning that i have also been working i started this work while i was at the world bank on illegal discrimination against women and in some work we we've done we've shown that in many developing countries legal barriers are still uh very important legal barriers to full uh labor force participation so um the the positive development of the last decade of the last two decades was that many developing countries were conducting reforms to better the position of women and of course these were reforms in the books it doesn't it didn't necessarily mean that they would be the the that they were going to be implemented but nevertheless they were an important step towards gender equality uh there is a concern that as a result of of uh the pandemic this agenda is on the back burner right now and that may lead to a long-run uh reversal of uh of progress that was made in the past um and a third area that is very likely to be affected is globalization and again i've talked in different forms about this there are kobe 19 has affected globalization of the trend towards the globalization globalization in many different channels so first let me say that uh no matter what you think about globalization i think it has been important for poverty reduction in many developing countries so especially in asia especially in east asia so um globalization is an important issue when it comes to developing countries and to the extent that there has been a trend towards d or slow globalization if you want the big losers if this continues are not going to be the advanced countries um as many have pointed out the marginal gains from additional globalization in developing in advanced economies are relatively small it's going to be the developing countries it's going to be the poorer countries that are going to be affected the most so how will covet 19 affect uh affect this trend what we saw happening with covet 19 is that global supply chains were blamed for shortages of personal protective equipment and also for food shortages there is a question out there is this true or is it fiction it would be important to get the facts straight to make clear where i stand on this i truly think this was pure fiction it was a red herring and it was not supported by the evidence it was a narrative that that was very convenient to the current administration and then however many reasonable people jumped on board and then it became yet another reason to um turn against globalization so independent of this question i think there is a more general question which is whether global supply chains amplify or diversify risk because i think this is an interesting question this is not the question we asked before copied 19 but again this is a question that we should be pursuing independent of what answer you you give to this question i believe that one thing that pandemic has done is it it made it more likely that this trend towards d or slow globalization that we had witnessed even before the pandemic is going to be accelerated and that again is going to lead to many very specific questions so let me mention some of them there is i won't rule out a new wave of protectionism um we'll see what happens with the u.s elections but i think i think it's fair to say that there has been bipartisan support uh in in the last year in the u.s for the us turning inward of putting its own citizens first um and as i mentioned earlier these these uh these uh these arguments regulate against global supply chains they were not voiced just by one party again there was bipartisan support for uh for um for reassuring activities um we also see a different type of protection is emerging in europe and i would link that to to the crisis to the pandemic for the following reason when when europe when the european union passed this very aggressive and very well needed stimulus package the question came up how are you going to finance this and one two of the ways that europe suggested were digital taxes and carbon border taxes so carbon border taxes are a form of protection no matter what you think about climate change and it's a form of protection it's going to have particularly severe implications for developing countries immigration restrictions are likely to stay in place or you know to continue so these are all policies that may be implemented going forward and they will raise many very specific questions about what the effects are on developing countries there are more there are more general policy design questions for example the role of the world trade organization the more generally the role of multilateral institutions in managing global crisis there is the question of what's the best way to achieve global consensus on important issues should we be pushing more for regional agreements versus plural versus multilateral agreements so these are concrete policy questions that that have come up before but i think they're becoming even more important in the aftermath of the crisis and as a result i see the field of international trade as becoming much more policy oriented and policy driven this is actually a point that i have made before that perhaps international trade was not enough policy focused as other fields i think what has happened in the last year is likely to to push the field in a much more policy relevant direction and the more general question i think that that applies not just to trade economies but developing economies in general is what is going to be the vision for development in a more closed world so if we think that as a result of the pandemic this trend towards the or slow globalization is going to be intensified so if we have more closed economies if openness is no longer the engine of growth what is the vision what is what is the model of development that uh we should be thinking of so this is more of a macro if you want a macro type question but nevertheless i think it's quite important technology and automation i think this is a first order uh area as with the globalization or slow globalization if you want to call it this way there was a strong existing trend towards automation and many people not just in advanced countries but also in developing countries were worried that machines were going to replace people and in the process they were going to render the traditional comparative advantage of developing countries in low-skilled labor they were going to rather disadvantage irrelevant when it comes to covet 19 i think it's fair to say that technology was the savior in high income countries it allowed many of us to work from home it allowed us to have this conference online um it allowed to a certain extent for online teaching without online teaching schools would have been completely closed however it also generated very strong inequality effects uh the big tech those of us who can work remotely are potentially better off and those who cannot uh are are the big losers we thought a lot about these issues in the context of the us and the context of advanced countries i think the effects in developing countries could potentially be even more even even larger and they may differ drastically across countries depending on the structure of the economy there you know the difference between an upper middle income country and the low income agricultural economy is important we would also expect to see big ski big differences across skills occupations generations gender but i think this is an agenda that's incredibly important and again what the kobet 19 shock does is it gives us a shock that a plausible plausibly exogenous shock to try to investigate how these trends have been affected and uh finally there are also the macro effects to consider so if you have automation and the globalization does this imply as i said the end of the export-led growth model of development does does it imply that advanced countries will be reshoring activities more and more and if so what is the implication for developing countries climate change climate change again many interesting questions so in the short term the environment was considered to be the big winner the pollution declined i would say that in the long run the effects are potentially detrimental and let me briefly explain why as with a gender as with gender the climate change agenda is on the back burner very few things seriously about climate change right now uh once again many countries are prioritizing growth that's what's in policy makers minds this is the big priority right now while as i pointed out earlier at the same time what we've done by shutting down the economy shows that in many countries even in low inc income countries people are concerned about more than growth so so i view that as a to a certain extent as as as an inconsistent inconsistency uh here more specifically it may lead to the demise of public transportation uh in the united states car sales are up i don't know what the picture is in developing countries but the quiet pop investments in public transportation were considered to be a big priority prior to call with 19. now such investments may be considered less desirable so we may start building bridges in instead of uh railroad trucks and finally if you want to be a true pessimist it may lead to the demise of cities both because people prefer to live in big suburban homes and also because many cities are facing bankruptcy again i'm not sure to what extent these concerns may apply to developing countries but there are issues that are important uh the more general questions that regard climate change uh are they mentioned those earlier are what does what does our behavior reveal about what the value of statistical life is i i this term is actually a loaded term um it's not um it's a very in my view it's a very narrow way to think about human life but nevertheless i would make again the point that the fact that we're willing as as a society that we're willing to shut down the world economy to protect lives contains a lot of information about the trade-offs we're willing to make they contain a lot of information about the discount rate and also about our attitudes toward tail risks and these are questions that are very important when we try to figure out what our policy towards climate change is and finally let me finish very briefly with institutions one question here is which institutions are associated with better outcomes it has been hypothesized that autocracies in this context did better than democracies because you need a strong leader to take action it's been hypothesized that societies in which there was trust did better what's the role of welfare state and finally there is the question of going forward how will kobe 19 affect demand for more state control so will we see citizens willing to take more authoritarian actions in return for more safety how will citizens be willing to trade off privacy versus effective tracking tracing and finally how are we going to think about human rights human rights protection versus social good these are all questions that have come up in the context of institutions and i don't think these are questions just for economies i think these are questions for social scientists in general so i realized that this uh talk became very long so let me just conclude by reiterating the fact that this is the biggest shock if not the biggest this is the biggest shock after world war ii uh at the same time i think it represents a momentous uh event for social sciences uh it's going to redefine research agendas in the future and in the process of the talk i mentioned several very concrete questions raising ranging from measurement how do we measure deaths to concrete policy or mechanism design questions how do we design interventions that are going to minimize minimize the impact of over 19 research questions on the long run effects what are the long run effects on human capital and so on but i think this uh pandemic also raises more general philosophical questions if you want about the value of life our priorities the role of state institutions and and among other things uh the role of science and scientists and again it will be very constructive in my view to try to answer these questions in a structural framework as economists like to to employ not only because they are intellectually interesting but because the answers to these questions mean from other important agendas they mean for the question of how do we deal tail risks going forward but they may also inform our response to climate change which is another big priority so i'll stop here and thank you very much for your patience penny thank you very much for uh this uh great thought-provoking talk you know you highlighted kind of big picture questions that this pandemic raised for societies throughout the world uh discuss measurement issues and also kind of what we learned in the short run and what is the agenda for policymakers and the researchers over the long run because we are running a little bit short of time i just want to emphasize that i know that some of you will be leaving us to join the nudc conference uh the way you joined that that you basically go on the website and click on uh zoom link uh of each of the uh sessions but for those of you who are uh staying here uh we do have a few uh questions for uh for penny from from the audience that i that i have uh aggregated so a lot of people uh there were many questions during uh q a about uh importance of measurement uh data availability both in the real time and over the longer run to answer a lot of the important questions that you uh brought up uh during your talk uh and what uh and uh what people are wondering is based on your experience uh as the chief economist of the world bank and as the researcher working on these issues and you know having colleagues work on these issues you know how do you think we can improve real-time data collection during pandemics uh and in general kind of cooperation between international organizations uh individual researchers to make progress both to improve our short-term responses to pandemics as well as study kind of longer-term implications of pandemics um thank you nina so let me say i i don't have all the answers but i can give some thoughts regarding the real-time response so first i think as i said during the talk the real-time response in my view was remarkable it was actually quite good this doesn't mean that it cannot be improved but it was much better than in the past and i would credit technology with that so because of current technologies we're able to do things we're not able to do before we are able to reach people through phones uh assuming most people even in developing countries have access to a smartphone in some cases you were able to to to contact them uh through the internet um so the response has been better than before uh why do i see the challenges so number one i think and that was mentioned that there could be better coordination so i think one challenge uh in the current pandemic was you were getting information from many different sites from many different sources the information that was coming in almost got journalistic character it was like journalists from all parts of the world uh reporting what was going on on the ground and that was very helpful but in the end you were not sure what the global picture was right and i i'm not sure this is a negative okay i'm not sure this could be different because we were doing things in real time we were collecting information as the pandemic was was um was spreading so i'm not sure that that there is another model that we could do research but but i think that going forward it would be important to try to aggregate this information to see if there were differences across settings across countries uh which communities did well which communities did not um and again that's that's why i'm suggesting that that we are once we have this pandemic under control we can move to the next stage which is the true research stage where we try to do to make the best out of this information two points i want to make is number one i think yes this the short-run response is important but also you know many of us are researchers we are academics and we should not lose sight of the fact that long-term research is important too right we want robust results sometimes what you say in the first month may not prove to be robust it was important to do that in this case most importantly because we needed to channel aid to the right sources and that did happen to to a certain extent but we also need long-term research so and that was one point of my talk the second one you know to be more specific in my answer the question was asked i'm a big believer in technology so i do think technology can help uh it did its job this time and going forward we can develop technology tools more effectively to to to guide aid yeah thank you and then uh let me another question that was asked is uh the following developing countries are poor and have lower government revenues by spending lots during the first weight of pandemic they are less likely to have the resources for the second and third third the second and third wave happens uh you also you know tax collection also deteriorates uh you know what's the best that uh you know that international organizations or communities uh help uh for you know countries in this situation should there be a global leader yeah so i think first of all we have much more information now than we had at the beginning of the pandemic and um at the certain extent there is some good news for developing countries so i remember back in march the world bank was trying to figure out how to mobilize resources so that many developing countries could buy ventilators by now we know across the world that ventilators are not as helpful as once thought so there is more information about where the expenditures should go so perhaps one thing we know rather than buying ventilators try to channel the money towards cash transfers to compensate those who who have lost their income so we have more information so that that whatever resources are available can be spent uh more wisely that said there is no question that developing countries face enormous challenges precisely because they have fewer resources and uh there are big structural issues that cannot be solved now there is there is a long-standing issue that the tax revenues are very low and so that there's no fiscal space and again that's to a certain extent what defines the developing economy to a certain extent so this is this is not the right time to solve this problem the only way to to to survive is through some international supports with some international aid and and the international community uh should help i think it's fair to say that the world bank and actually all these international institutions have shown willingness to to to support developing countries and that's the good news and that the last question is going to be a big picture question uh so uh some people say that uh you know the current pandemic has shown that the current system is unsustainable and growth is the main problem and they're wondering you know how can you know what have we learned from the pandemic on how countries can grow sustainably i'm not sure i would agree that the current pandemic has shown that that the current system is unsustainable i i don't know what this means uh it's not the first time that we are faced with a pandemic i would actually let me flip it around we were able to shut down the economy for several months and this is because we had amassed resources to do so um in the united states and in europe there was a massive uh relief program a successful successful relief programs that managed to compensate not everyone but at least a good fraction of the population the reason we were able to do so is because we had uh benefited from the growth of the past so so i'm not sure that i would write off growth uh completely and the fact that developing countries are in such in a war situation is precisely because they don't have these resources because they didn't have the growth and poverty reduction that advanced economies by definition had in the past that said where i agree and that's the point i want i try to make is that growth is not everything right and the one thing that this pandemic our response to the pandemic demonstrated is that we are willing to sacrifice growth to save human lives or you know to to make sure that people don't get severely sick and if we're willing to do something as drastic as shutting down the economy no one would have thought this possible two years ago and yet we did it right if we can do that why can we do something less drastic which is sacrifice growth at least in a country like the united states sacrifice a little bit of growth to make sure that the the air is cleaner the water is cleaner right so so why are not are we not willing to make this trade-off i also will add that i understand that these tradeoffs are triggered in developing countries but at least in this country we should be able to we should be willing to make these tradeoffs yeah thank you thank you so much uh penny for all your thoughts on these very complicated uh issues and giving the uh the researchers many in policymakers many many ideas uh on kind of big issues that uh we need to focus on uh going forward so uh thank you also everybody else for joining us and i hope that many of you can also join us for the remainder of the any udc conference there are over 200 papers some of them actually focusing on the pandemic and many other issues so uh there's a lot to be uh learned there thank you thank you nina bye everyone bye

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Length: 88min 14sec (5294 seconds)

Published: Mon Nov 09 2020