Affiliation: 
University of Oxford
Credentials: 
Associate Professor

Voting history

Lockdowns and UK Economic Performance

Question 2: How much will the new lockdown measures introduced on Thursday November 5 hurt UK economic activity this year relative to a counterfactual with the milder measures adopted over the summer?

Answer:
Large damage
Confidence level:
Confident
Comment:
The second lockdown has been done in a different situation than the first. There is less much less uncertainty: we know that the Covid-19 virus hits disproportionally more the older adults than the young. For this reason, I would think that a considerable chunk of the population would keep consuming non-tradable goods in the absence of a lockdown.

Question 1: How much of the decline in GDP experienced to date would have been avoided in the absence of any lockdown measures or other policy interventions (such as fiscal support)?

Answer:
A small portion of the decline
Confidence level:
Confident
Comment:
This question is very complicated. In short, I would say that the first lockdown did not impact much economic performance, but the absence of fiscal support would have had terrible consequences on the UK GDP. Let me split this answer into three subparts. First, a fraction of the UK GDP is composed of exports. Given the unfavorable world economic conditions and the disruption of the global supply chain, this fraction would collapse independently of the lockdown. Second, lockdown prevented agents from consuming certain types of goods, the so-called non-tradable goods, like restaurants, pubs, hairdressers, and estheticians. So, how much would the households consume these types of goods in the middle of a terrible pandemic with a lot of uncertainty and full Intensive Care Units in the absence of the lockdown? My answer would be not much. Most likely, some households with low-risk aversion would keep going out, but the vast majority would cut this consumption type. In my opinion, the main difference between Sweden and the UK's economic performance lies in the severity of the pandemic more than the severity of the lockdown. Indeed, despite the high death rate, Intensive Care Units were never running at full capacity in Sweden. The high death rate's main reason was the high spread of the virus in care homes. Therefore, a considerable fraction of Swedish households kept consuming non-tradable goods during the pandemic. Third, I think that the absence of fiscal stimulus would have a terrible impact on the GDP. Indeed, the drop in export, the disruption of the global supply chain, and the aggregate demand decline would have led to a disproportionate default of UK firms and a large fraction of unemployment with catastrophic consequences for the UK GDP.

Question 3: Using not only the policy tools that have been part of the UK policy mix thus far but also policy tools implemented in other countries, to what extent does the government face a tradeoff between saving lives and preserving livelihoods? 

Answer:
Large tradeoff
Confidence level:
Very confident
Comment:
The current measures have been implemented to protect mainly the old and the most vulnerable. Nevertheless, they impose a huge burden on the less-wealthy/lower-income households in the economy. Most of these households work in sectors where it isn't easy to work from home. Hence, they seem to have a higher probability of losing their job. These households can have some difficulties in finding a job after being unemployed for many months. Therefore, less-wealthy/lower-income households before the pandemic are becoming poorer. This imposes a huge trade-off between lives and livelihoods.