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QED Faculty and Students Engaged in COVID Research

May 2021 – The Queen’s Economics Department (QED) has been at the forefront of research into the COVID-19 pandemic. Studying the pandemic’s economic and social effects, QED faculty research has led the way in analyzing the effects of COVID on economic outcomes, producing instructive findings with implications for policy makers and governments.

Members of the QED affiliated with the John Deutsch Institute for the Study of Economic Policy (JDI) have influenced government strategy through their engagement of policymakers and involvement on national task forces and think tanks, and through their academic research and policy briefs.

Modeling Economic Impact

Another way in which QED economists have shaped policy is through the development of models to assess the impact of COVID-19 on the economy. One of these efforts that has had remarkable influence on policy in Canada, and elsewhere, is the STUDIO model [1] developed by a team of economists from the QED and Limestone Analytics. The team included Dr. Cotton, Brett Crowley, Dr. Bahman Kashi, Dr. Huw Lloyd-Ellis, and Ph.D. candidate Frederic Tremblay. Their model allows them to estimate the economic costs of alternative lockdown and recovery strategies proposed by policymakers and public health officials. The model has been used to author numerous policy briefs at the request of provincial and federal policymakers, and it was the foundation for the Economic Impact Explorer dashboards released by Limestone Analytics and Local Intel, as well as the Eastern Ontario Leadership Council’s COVID-19 economic impact tool and Canada’s Digital Technology Supercluster Looking Glass project.

The STUDIO model provided the economic analysis for Global Canada’s COVID Strategic Choices Group, a task force of business leaders, policymakers, and academics brought together to assess the scientific evidence around the epidemiological and economic impacts of alternative lockdown strategies to recommend a path forward for provincial and federal governments. Their “Canadian Shield” proposal [2]  gained a lot of media attention and shaped policy decisions at the provincial and national levels. Dr. Cotton served as the economic modeling lead for the group. The model is also the primary macroeconomic model for the One Society Network, a nationwide network of researchers funded by the Public Health Agency of Canada (PHAC) and the Natural Sciences and Engineering Research Council of Canada (NSERC). The network is working towards increasing Canada’s capacity at infectious disease modeling, bringing together experts in both economics and epidemiology. Dr. Cotton is the co-director of the network, and Dr. Lloyd-Ellis is leading the network’s macroeconomic modeling efforts.

The STUDIO model has also been applied to model the economic costs of COVID-19 in Malawi and Rwanda. For example, it was used as a quantitative method that added estimates of national income and employment income to four different modeled scenarios of how Malawi could emerge from the COVID-19 crisis by 2025 in analysis undertaken by a team of economist from the QED and Limestone Analytics in partnership with the Malawi National Planning Authority and the Copenhagen Consensus Center [3]. It has also been used to compare outcomes under alternative stimulus spending policies in Malawi [4].

Other efforts to model the macroeconomic and labour force impacts of COVID-19 include the work by Dr. Brant Abbot and PhD candidate Nam Phan. The vast majority of OECD countries introduced either expanded unemployment benefits or a wage subsidy program to counter the negative economic effects of COVID-19. For this reason, the question of which of these two policies is more effective is important for crafting public policy. Dr. Abbot and Phan studied the efficacy of wage subsidies in a pandemic relative to enhancing unemployment benefits [5]. The research developed a model of the economic transitions from a pandemic shock through to full economic recovery and used it to study alternative pandemic wage subsidy and unemployment benefits programs on the labour market and household welfare. They show that it is optimal to subsidize most of the wages of affected workers up to a weekly ceiling. Low-income workers benefited the most from the wage subsidy, while high-income workers on average experienced a welfare loss under the optimal wage subsidy scheme. Finally, it was found that there are substantial welfare gains from implementing a wage subsidy and enhanced unemployment benefits jointly, as opposed to one or the other.

Assessing the Policy Response and Planning for Future Crises

Dr. Frank Milne and Dr. David Longworth together produced several working papers studying the pandemic that provided an instructive picture of key areas in which governments failed to adequately prepare for the crisis and made recommendations for reforms to prepare for future pandemics. Their papers are being developed into a book for World Scientific Publishing. 

Among other things, they show that in far too many cases forensic report recommendations of previous pandemics were ignored. They found that substantial weaknesses in the preparation by public health authorities and governments increased the health and economic costs of the COVID-19 pandemic relative to what they would have been if pre-existing recommendations had been followed and a wider set of plans had been put into place [6]. They also produced a working paper discussing 10 parallels between the lack of preparation of financial system regulators prior to the Global Financial Crisis and the lack of preparation by public health authorities and governments prior to COVID-19. The paper considered the steps that were taken to deal with each of the deficiencies in financial system regulation following the Global Financial Crisis as well as the parallel steps that now need to be taken to deal with the deficiencies in pandemic planning [7]. Apart from the direct economic consequences due to illness and death from the virus, the main economic and financial costs during the COVID-19 crisis have been due to the varying degrees of preventative measures taken by the public, firms, and governments that directly impacted economic and financial activity. Thus, there is an important interdependence between economic, financial, and health policy actions, and a working paper produced by Dr. Milne and Dr. Longworth that proposes the use of regular, combined medical, economic and financial stress tests and wargames in preparing for future pandemics and other major environmental shocks [8] provided key insights for policymakers preparing for the next pandemic. Dr. Milne and Dr. Longworth produced another forward-looking working paper which sets forth recommendations for carrying out post-mortems on the COVID-19 experience, planning for future pandemics, and establishing transparent and accountable governance systems for ongoing implementations of pre-pandemic plans [9]. This work has the potential of helping future policymakers avoid the substantial weaknesses in the preparation for the COVID-19 pandemic that increased health and economic costs.

In a similar vein, Dr. Robin Boadway and Dr. Christopher Cotton were invited to join the Royal Society of Canada’s COVID-19 working group on economic recovery, releasing a policy report highlighting how the pandemic has revealed weaknesses in government and society that need to be addressed so that Canada can emerge from the crisis with a stronger foundation than they entered it [10]. The working group’s briefing focused on advising policymakers on steps that can be taken to build a better Canada out of the pandemic and addressing how Canada can renew its social contract which ensures all people in society have the chance to live a dignified life. The briefing recommended developing systems that enable more efficient and effective policy response across provinces and in collaboration with the federal government. It also recommended that the federal and provincial governments seriously assess the feasibility of a basic income guarantee (BIG), the reform of provincial and federal labour codes to ensure paid sick leave, and more support for universal access to childcare and early childhood education. It also urged the government to implement a comprehensive tax reform that enhances the fairness of taxes by broadening the tax base to treat all capital income on a par with earnings and address intergenerational transmission of wealth inequality by re-instituting an inheritance tax.

Additionally, Dr. Thorsten Koeppl served on the C.D. Howe Working Group on Monetary and Financial Measurement, releasing a series of policy memos [11] [12] [13] [14] to guide policy making in Canada.

COVID’s Impact on Housing

Dr. Sitian Liu, in collaboration with colleagues from the Federal Reserve Bank of Dallas, was the first to study the effects of the pandemic on neighborhood-level spatial variation in housing demand, and to test its underlying driving forces [15]. Using several local housing indicators such as inventory, home price, and rent to track the spatial difference in the change of housing demand, Dr. Liu and colleagues found that the pandemic has led to a shift in housing demand away from neighborhoods with high population density towards the suburbs and neighborhoods with lower population density. The results suggest that the reduced demand for dense neighborhoods may persist even as the economy recovers. Lastly, a significant shift in housing demand away from cities with a greater share of telework jobs and higher pre-COVID-19 home values was found, although the magnitude is smaller than the within-city shift. Dr. Liu’s research contributes to the literature on how city structures change in the presence of the dispersion forces of diseases and may be useful for policymakers trying to understand these forces and their impact on the economy and society.

Dr. Robert Clark and colleagues produced research studying the effectiveness of debt-relief programs targeting short-run household liquidity constraints implemented in Canada following the COVID-19 outbreak [16]. These programs, offered by financial institutions during the pandemic with backing from the federal government, the banking regulator, and the Canada Mortgage and Housing Corporation (CMHC), offered a number of options to borrowers to alleviate their financial obligations in a context of job losses and economic insecurity. Dr. Clark and colleagues, using credit-bureau data, showed that even though these programs offered important savings to Canadians who opted in, enrollment was low. In addition, they documented that this outcome was mainly due to a mix of limited information about the programs and fixed non-monetary costs associated with enrollment. In a context where the debt-relief programs were implemented to minimize personal defaults and to help stabilize the economy, these findings have important policy implications.

COVID’s Impact on Trade

Another important effect COVID-19 had on Canada is the effect that the pandemic-induced border closure had on Canadian communities near the border. Dr. Beverly Lapham and colleagues produced research studying this effect [17]. They use community-level data on border crossings to estimate the shifts in retail spending due to COVID related travel restrictions.

During normal times, Canadian retailers near the border see a loss in potential revenue due to cross-border shopping by Canadian consumers. COVID travel restrictions have reduced these losses. reduces these losses. Such “foregone losses” differed across community and industry, with gas stations and accommodation services, as well as retailers located in less affluent Canadian communities with nearby US shopping options seeing the largest foregone losses (or benefits) from the restricted travel. By quantifying the revenue losses associated with cross-border shopping, the research can inform future policy decisions which restrict or facilitate the ability of Canadians to purchase goods and services from foreign retailers.

Faculty of the John Deutsch Institute have been leaders of research into the effects of the COVID-19 pandemic and have provided instructive analysis that has been relevant to policymakers and public officials seeking to craft public policy to guide Canada out of the pandemic and plan for the future.

Engaging Graduate Students

The department’s initiatives around COVID-19 research have presented many opportunities for the engagement of graduate students. Ph.D. Candidate Frederic Tremblay was an instrumental collaborator on the development of the STUDIO model and its applications to shape policy in Canada and internationally. He is receiving NSERC funding from the One Society Network to continue this work as a post-doc, and to participate in a nationwide network of leading researchers working at the intersection of economics and public health in order to better prepare Canada for the next crisis.

Additionally, five Queen’s Economics Department graduate students received rapid response research grants from Mitacs to work on COVID-19 research. Ph.D. students Ludovic Auger, Baiyou Chen, Rebecca Dafoe, Mahtab Hanzroh, and Nam Phan each received financial support to conduct research on different topics related to the impact of COVID-19 on economic outcomes over the summer of 2020, several of whom have continued this research. The funding was secured by Professors Christopher Cotton and Huw Lloyd-Ellis with support from the Faculty of Arts and Sciences in order to engage students on the JDI’s COVID research team. Several MA students are also actively engaged in COVID-19 related research as they work to complete MA essays on related topics.

References

[1] Cotton, C., Crowley, B., Kashi, B., Lloyd-Ellis, H., and Tremblay, F. (2020). Quantifying the Economic Impacts of COVID-19 Policy Responses on Canada’s Provinces in (Almost) Real-Time. QED Working Paper Number 1441.

[2] Agnew, M., Ayinde, T., Beaulieu, A., Colijn, C., Cotton, C., Crowe, M., Dhalla, I., Ferbey, J., Greenhill, R., Haggart, B., House, B., Imgrund, R., Jebwab, J., Khangura, J., Kwong, J., McCabe, C., Morris, A., Soucy, J.P. R., and Tuite. A. (2020). Building the Canadian Shield: A New Strategy to Protect Canadians from COVID and from the Fight Against COVID. Global Canada, COVID Strategy Choices Group.

[3] Brady, C., Cotton, C., Crowley, B., Davis, S., Farquharson, C., Kashi, B., Lloyd-Ellis, H., and Tremblay, F. (2020). Emerging from Crisis: Applying Scenario Planning in Malawi. Limestone Analytics and JDI Policy Paper 20-1201.

[4] Crowley, B., and Tremblay, F. (2021). Optimizing COVID-19 Stimulus Spending in Malawi. Limestone Analytics and JDI Policy Paper 21-0301.

[5]

[6] Milne, F., and Longworth, D. (2020). Covid-19 and the Lack of Public Health and Government Preparation. QED Working Paper Number 1436.

[7] Milne, F., and Longworth, D. (2021). Parallels Between Financial Regulation Prior to the Global Financial Crisis and Lack of Public Health Preparation Prior to Covid-19. QED Working Paper Number 1455.

[8] Milne, F., and Longworth, D. (2020). Preparing for Future Pandemics: Stress Tests and Wargames. QED Working Paper Number 1437.

[9] Milne, F., and Longworth, D. (2021). Public Health and Government Preparations For Future Pandemics. QED Working Paper Number 1451.

[10] McCabe, C., Boadway, R., Lange, F., Gold, E.R., Cotton, C., Adamowicz, W., Breznitz, D., Elgie, S., Forget, E., Jones, E., de Marcellis-Warin, N., Peacock, S., Tedds, L. (2020). Renewing the Social Contract: Economic Recovery in Canada from COVID-19. RSC Policy Briefing, Royal Society of Canada COVID-19 Task Force.

[11] https://www.cdhowe.org/council-reports/enhanced-government-credit-facility-needed-crisis-working-group-monetary-and-financial-measures

[12] https://www.cdhowe.org/council-reports/time-essence-ceba-crisis-working-group-monetary-and-financial-measures

[13] https://www.cdhowe.org/council-reports/expanded-bank-canada-balance-sheet-requires-balancing-act-crisis-working-group-monetary-and

[14] https://www.cdhowe.org/council-reports/guidelines-and-creativity-key-restoring-financial-confidence-crisis-working-group-monetary-and

[15] Liu, S., and Su, Y. (2021). The Impact of the COVID-19 Pandemic on the Demand for Density: Evidence from the U.S. Housing Market. JDI Policy Paper 21-0401.

[16] Allen, J., Clark, R., Li, S., and Vincent, N. (2021). Debt-relief programs and money left on the table: Evidence from Canada’s response to Covid-19. JDI Policy Paper 21-0102.

[17] Baggs, J., Fung, L., and Lapham, B. (2021). An Empirical Evaluation of the Effect of Covid-19 Travel Restrictions on Canadians’ Cross Border Travel and Canadian Retailers. QED Working Paper Number 1457.

Queen’s Economists Awarded Major NSERC Grant to Build Interdisciplinary Research Connections Between Economists and Epidemiologists

May 2021 – Economists at Queen’s University have received a major grant from the Natural Sciences and Engineering Research Council of Canada (NSERC) to build a Canada-wide network of researchers working at the intersection of public health, epidemiology, and economics.

The Queen’s researchers are helping lead the team that won the two-year, $1.25 million grant through NSERC’s Emerging Infectious Disease Modeling Initiative. The Queen’s and University of Alberta based team, referred to as the One Society Network, is one of five groups to receive funding through the initiative. While the other four recipients focus on building Canada’s capacity at epidemiological modeling, the One Society Network is the only group focused on understanding the broader impacts of infectious diseases and public health policy on outcomes involving economics, education, environment, and inequality.

Professor Christopher Cotton from the Queen’s Economics Department (QED) and JDI will co-lead the network with Professor Christopher McCabe from the Institute for Health Economics in Alberta. The team also includes Professor Huw Lloyd-Ellis (QED) who is leading the network’s efforts to model the impact of public health policy on macroeconomic outcomes, and Professors Troy Day and Felicia Magpantay (math) who are leading epidemiological modeling. Former Ph.D. students from the QED will also be involved in the network including Frédéric Tremblay who will serve as a post doc, and Maggie Jones, who is currently an Assistant Professor at University of Victory and is leading the network’s efforts to study the disproportionate impact of infectious disease policy on indigenous populations and marginalized groups. They are joined with other researchers in epidemiology and economics from across Canada.

The prestigious grants were awarded by NSERC in partnership with the Public Health Agency of Canada (PHAC) to undertake research “modelling infectious diseases to be applied to public needs associated with emerging infectious diseases and pandemics such as COVID-19” [1]. In a press release, the government said that “the five networks will directly support short-, medium- and long-term public health decisions by building and coordinating Canada’s national capacity” [2] for infectious disease modelling. The Honourable Patty Hajdu, Minister of Health, stated that “building these networks within the Canadian research community will be instrumental in preparing for future public health challenges.”

The selection of the One Society Network for grant funding comes after the network argued decision makers could not achieve their goal of truly preparing Canada for a future pandemic unless we better understand the full impacts of public health policy, including social and economic impacts, such as the effects on education, environmental, mental-health, and economic well-being in addition to understanding the impacts policy has on disease transmission and virus cases. The One Society Network will now work to develop “modelling for evaluating alternative policy responses during pandemics for all sectors of the economy and aspects of society, including marginalised groups [and…] will also be collaborating on multi-disciplinary training programs for skills development to support public policy making in future pandemics” [3] to help prepare Canada for the next pandemic.

               For more information about the One Society Network, see: https://onesocietynetwork.ca

References

[1] https://www.nserc-crsng.gc.ca/NSERC-CRSNG/FundingDecisions-DecisionsFinancement/2021/EIDM-MMIE_eng.asp?wbdisable=true

[2] https://www.canada.ca/en/innovation-science-economic-development/news/2021/04/government-of-canada-invests-in-infectious-disease-modelling-to-support-canadas-covid-19-response.html

[3] https://www.nserc-crsng.gc.ca/NSERC-CRSNG/FundingDecisions-DecisionsFinancement/2021/EIDM-MMIE_eng.asp?wbdisable=true

Economics STUDIO Model Shapes COVID-19 Policy in Canada and Around the World

June 2021 – Since the onset of the pandemic, a group of Queen’s Economics Department (QED) researchers have had a remarkable influence on public discourse and government policy around COVID-19 lockdowns both in Canada and abroad. This influence has largely come through their STUDIO Economic Model, developed to help policymakers and public health officials estimate the economic costs associated with alternative disease mitigation and reopening scenarios.

With the onset of the COVID-19 pandemic in early 2020, there was significant uncertainty about how governments should respond to slow or stop the spread of the disease. How effective were alternative lockdown policies at protecting the population from COVID? And, how costly were such policies in terms of their impacts on economies, education disruptions, inequality, and even other aspects of health and mental health? While epidemiologists and public health officials had real time data on COVID-19 cases and deaths and could presented estimates of how many lives might be saved by “flattening the curve” or through stay-at-home orders, we were less prepared with estimates of the costs of such lockdown policies to society. This led to a perception that public health policies were being chosen without regard to their broader and long-term costs.

This led economists from the QED and Limestone Analytics to develop the Short-Term Under-capacity Dynamic Input-Output (STUDIO) model [1]. The STUDIO model allows researchers to estimate the economic costs of alternative lockdown and recovery strategies proposed by policymakers and public health officials, breaking the costs down by sector at the local level. It allowed industry leaders and local communities to understand the impact of the lockdown policies to advocate for relaxing restrictions in low-risk industries and locations. Over the past year, the early capabilities of the model have been expanded to provide a tool for public health officials and policymakers who want to compare the economic costs under alternative lockdown and reopening plans.

  The team is led by QED Professors Huw Lloyd-Ellis and Christopher Cotton, in partnership with Brett Crowley, Dr. Bahman Kashi, and Post Doc Frédéric Tremblay. The research has led to interdisciplinary academic research collaborations with epidemiologists and public health researchers, and a broad range of economists from other institutions. It has also led to community and industry partnerships, as the team members collaborated with local, provincial and national governments, private companies, major think tanks, and national research networks to disseminate their results and make their model and analysis accessible to decision makers.  

The Model

The STUDIO model adapts, calibrates, and implements a dynamic, seasonally adjusted, input-output framework that uses regional Input-Output tables, commonly provided by statistical agencies, to represent and model the evolving production structure of the economy. Unlike standard IO models, STUDIO incorporates supply-side constraints on production. This framework allows STUDIO to dynamically model the effects of severe shocks like those caused by COVID-19 and the ensuing lockdowns by modelling the economy’s evolving production dynamics and allows researchers to provide forecasts of the economic impacts of COVID-19 going into the future. By incorporating different assumptions to represent alternative reopening strategies, the model is then able to provide projections for the economic effects of these different strategies as the economy recovers from the initial shocks.

To calibrate the parameters of the model and the specific IO structure of each provincial economy, the STUDIO model uses Symmetric Provincial Input-Output (IO) Summary Tables based on annual Supply-Use production data, inter-provincial and international trade flow data, and labour market data (wages and employment) for each province, provided by Statistics Canada. The STUDIO model then calculates production outcomes for key industries in each region following the COVID-19 shocks by explicitly imposing labour constraints in the production function, replicating observed changes in hours worked and employment for each of the industries studied using data from the monthly Labour Force Survey (LFS). In addition, it allows for endogenous demand-side effects coming from increased unemployment via a simple household expenditure model.

The STUDIO model studies an intra-year period, and its results are thus reported relative to counter-factual levels of economic metrics for each point in the year calculated as estimates for what would have occurred in no-pandemic scenario, to account for seasonal adjustments in intra-year economic activity.

Initial Findings

STUDIO’s initial modelling considered five different reopening strategies and their economic effects for each Canadian province over the course of 2020. This initial analysis demonstrated several of the model’s key findings that have been influential for public policy in Canada. The initial five possible scenarios ranged from the economic effects that would have occurred if each province adhered to their originally stated reopening plans for spring and summer 2020, to scenarios where new lockdown measures may have been required in fall 2020. This initial modelling showed just how costly COVID-19 was for the economy; even the optimistic scenario predicted significant deviations from seasonal norms until the end of 2020. A large range of possible outcomes based on the initial scenarios was shown, due to their alternative policies. Not surprisingly, scenarios that either introduced negative demand shocks or further negative supply shocks resulted in greater losses across the board than the Optimistic scenario. Of those that introduce demand shocks, the “Dr. Doom scenario”, which assumed household’s propensity to consume out of current income declined by 20% by May 2020 and subsequently recovered only gradually, implied the largest and most persistent losses.

The STUDIO model also implied that the scenarios most devastating for the economy were scenarios in which a second lockdown was required. It was modeled that a second wave scenario in the fall that looked like the first would impact PEI, Newfoundland and Quebec most severely relative to seasonal norms, and Manitoba the least severely. According to these scenario estimates, the overall GDP loss due to combined first and second waves and consequent lock-downs would exceed $285 billion in 2020. For descriptions of each initial scenario and precise numerical results, see [1]. These results suggested to the researchers at the JDI and Limestone Analytics that the least costly restriction policy would be to lockdown earlier and get the pandemic under control as opposed to maintaining less strict lockdowns for a longer period of time.

STUDIO Provides Instructive Further Analysis

The STUDIO model was also applied in December 2020 to analyze the effects of different recovery strategies then under consideration [3]. A policy brief produced by Queen’s economists applied the STUDIO model to study the effects of three different strategies: a Continued Mitigation strategy, that avoided strict economic lockdowns other than in cases when necessary to protect hospitals from becoming overwhelmed, and restricting high-risk large social gatherings; the Melbourne Model, where the imposition of immediate and wide-reaching lockdown restrictions would be undertaken in an effort to bring local transmission rates of COVID-19 close to zero, offering a promise of a fully-open economy before wide-spread vaccination is feasible, which was based off of the Australian zero-COVID strategy; and the Canadian Shield Proposal, which pursued the same eventual goal as the Melbourne Model, but assumes moderately-less-restrictive lockdown measures are used for a longer period of time compared to the Melbourne Model.

               The analysis using the STUDIO model found that there was variation in optimal policy across location. As defined, a Canadian Shield policy was shown to be consistently less-costly than a Melbourne Model policy, with this relationship holding across all locations. In most locations the Continued Mitigation policy was shown to be most costly for the economy, even when widespread vaccination and permanent relaxation of lockdown restrictions by fall 2021 were assumed. However, this was not the case in Quebec or Atlantic Canada, however, where a Melbourne Model policy was shown to be more economically costly. For precise numerical findings, see [3]. Overall, the effects of the alternative policies over the course of the year were graphically depicted [3]:

The analysis illustrated that a more intense early year lockdown could be less costly for the economy than less-intense, shorter duration lockdowns spread across a longer period of time, even under an expectation that vaccinations will be widely available in the second half of the year, facilitating a more robust recovery in the fall and winter even without an early-year lockdown. This was because full economic activity does not immediately resume with the lifting of economic restrictions; rather the economy takes time to fully recover. This meant an intense lockdown allowing for full reopening afterwards may have resulted in fewer overall jobs lost and a lower decline in GDP than on-again, off-again lockdowns where new restrictions would be required every few months before the economy had a chance to fully recover from the previous round of restrictions. Additionally, the briefing suggested that the worst of the economic impacts of the pandemic are now behind us, although the recovery still has a ways to go.

STUDIO Model Influences Policy in Canada

The STUDIO model has had a large influence on public policy in Canada since its creation. The model has been used to author numerous policy briefs at the request of provincial and federal policymakers, and it was the foundation for the Economic Impact Explorer dashboards released by Limestone Analytics and Local Intel, as well as the Eastern Ontario Leadership Council’s COVID-19 economic impact tool and Canada’s Digital Technology Supercluster Looking Glass project.

The STUDIO model provided the economic analysis for Global Canada’s COVID Strategic Choices Group, a task force of business leaders, policymakers, and academics brought together to assess the scientific evidence around the epidemiological and economic impacts of alternative lockdown strategies to recommend a path forward for provincial and federal governments. Their “Canadian Shield” proposal, [4] gained a lot of media attention and helped shape policy decisions at the provincial and national levels. Dr. Cotton served as the economic modeling lead for the group.

The model is also the primary macroeconomic model for the One Society Network, a nationwide network of researchers funded by the Public Health Agency of Canada (PHAC) and the Natural Sciences and Engineering Research Council of Canada (NSERC). The network is working towards increasing Canada’s capacity at infectious disease modeling, bringing together experts in both economics and epidemiology. Dr. Cotton is the co-director of the network, and Dr. Lloyd-Ellis is leading the network’s macroeconomic modeling efforts. The STUDIO model’s use by the One Society Network places it at the forefront of the Canadian effort to collectively develop a national capacity for understanding the impacts of COVID-19, and preparing for the next pandemic. Funding for the One Society Network came through NSERC’s Emerging Infectious Disease Modeling Initiative, an initiative launched by the Minister of Innovation, Science, and Industry, and the Minister of Health to “strengthen ties between the academic community, industry and the public sector [and…] significantly improve the coordination of infectious disease modelling to help Canada better respond to future public health threats” [5]. Situated as the only NSERC funded research network focusing on the broad social and economic impacts of the pandemic and public health policy, as the Initiative mainly focused on epidemiological research networks, the One Society Network, with the STUDIO model at its core, will play an important role in supporting “short-, medium- and long-term public health decisions [and…] produc[ing] tools to evaluate alternative pandemic policy responses for all sectors of the economy and aspects of society, including marginalized groups” [6].

STUDIO Applied in International Analysis

The influence of the STUDIO model has not been limited to Canada and Canadian policy. Demonstrating its adaptability and versatility, the STUDIO Model has contributed to economic analysis in multiple international contexts. Specifically, the STUDIO model has been applied to model the economic costs of COVID-19 in Malawi and Rwanda. For example, it was used as a quantitative method that added estimates of national income and employment income to four different modeled scenarios of how Malawi could emerge from the COVID-19 crisis by 2025 in analysis undertaken by a team of economists from the QED and Limestone Analytics in partnership with the Malawi National Planning Authority and the Copenhagen Consensus Center [7]. It has also been used to compare outcomes under alternative stimulus spending policies in Malawi [8].

References

[1] Cotton, C., Crowley, B., Kashi, B., Lloyd-Ellis, H., and Tremblay, F. (2020). Quantifying the Economic Impacts of COVID-19 Policy Responses on Canada’s Provinces in (Almost) Real-Time. QED Working Paper Number 1441.

[2] Avelino, A. F. T., and Hewings, G.J. D.  (2019). The Challenge of Estimating the Impact of Disasters: Many Approaches, Many Limitations and a Compromise. in Y. Okuyama and A. Rose (eds.), Advances in Spatial and Economic Modeling of Disaster Impacts, Advances in Spatial Science. Springer Nature Switzerland AG.

[3] Cotton, C., Crowley, B., Kashi, B., Lloyd-Ellis, H., and Tremblay, F. COVID-19 Planning for 2021: Comparing the Economic Impact of Alternative Recovery Scenarios. Limestone Analytics and JDI Policy Paper 20-1202, Dec. 2020

[4] Agnew, M., Ayinde, T., Beaulieu, A., Colijn, C., Cotton, C., Crowe, M., Dhalla, I., Ferbey, J., Greenhill, R., Haggart, B., House, B., Imgrund, R., Jebwab, J., Khangura, J., Kwong, J., McCabe, C., Morris, A., Soucy, J.P. R., and Tuite. A. (2020). Building the Canadian Shield: A New Strategy to Protect Canadians from COVID and from the Fight Against COVID. Global Canada, COVID Strategy Choices Group.

[5] https://www.canada.ca/en/innovation-science-economic-development/news/2021/04/government-of-canada-invests-in-infectious-disease-modelling-to-support-canadas-covid-19-response.html

[6] https://www.canada.ca/en/innovation-science-economic-development/news/2021/04/government-of-canada-invests-in-infectious-disease-modelling-to-support-canadas-covid-19-response.html

[7] Brady, C., Cotton, C., Crowley, B., Davis, S., Farquharson, C., Kashi, B., Lloyd-Ellis, H., and Tremblay, F. (2020). Emerging from Crisis: Applying Scenario Planning in Malawi. Limestone Analytics and JDI Policy Paper 20-1201.

[8] Crowley, B., and Tremblay, F. (2021). Optimizing COVID-19 Stimulus Spending in Malawi. Limestone Analytics and JDI Policy Paper 21-0301.

This article was written by JDI Intern, Brock Mutic. For questions on this research, contact Christopher Cotton.

Failures of COVID-19 Policy Explored in New Book by QED Economists

May 2021 – A book proposal by faculty members from Queen’s Economics Department (QED) about the systemic failures in Canada relating to COVID-19, how these failures relate to failures during the 2008 Financial Crisis, and how governments can better prepare in the future, has been accepted for publication.

The book, to be entitled “The Covid Pandemic and the Global Financial Crisis: Learning from the failures to prepare for a future pandemic”, is written by Dr. David Longworth and Dr. Frank Milne. The book builds on several research papers Dr. Longworth and Dr. Milne wrote about the COVID-19 pandemic.

Their research covers several interconnected topics. It will discuss how in far too many cases forensic report recommendations of previous pandemics were ignored. They find that substantial weaknesses in the preparation by public health authorities and governments increased the health and economic costs of the COVID-19 pandemic relative to what they would have been if pre-existing recommendations had been followed and a wider set of plans had been put into place [1].

They also produced a working paper discussing 10 parallels between the lack of preparation of financial system regulators prior to the Global Financial Crisis and the lack of preparation by public health authorities and governments prior to COVID-19. The paper considered the steps that were taken to deal with each of the deficiencies in financial system regulation following the Global Financial Crisis as well as the parallel steps that now need to be taken to deal with the deficiencies in pandemic planning [2].

According to Dr. Longworth and Dr. Milne, apart from the direct economic consequences due to illness and death from the virus, the main economic and financial costs during the COVID-19 crisis have been due to the varying degrees of preventative measures taken by the public, firms, and governments that directly impacted economic and financial activity. Thus, there is an important interdependence between economic, financial, and health policy actions, and a working paper produced by Dr. Milne and Dr. Longworth that proposes the use of regular, combined medical, economic and financial stress tests and wargames in preparing for future pandemics and other major environmental shocks [3] provided key insights for policymakers preparing for the next pandemic.

The book will also touch on Dr. Milne and Dr. Longworth’s other forward-looking paper which set forth recommendations for carrying out post-mortems on the COVID-19 experience, planning for future pandemics, and establishing transparent and accountable governance systems for ongoing implementations of pre-pandemic plans [4].

               Combined, this research in part provided the basis for Dr. Longworth and Dr. Milne’s new book. Focusing on learning from past failures to better prepare Canada for future pandemics, the book will provide instructive analysis for researchers and policy makers and offer insights into what can be learned from systemic failures during the Great Financial Crisis to prepare for future pandemics. The book is being published by World Scientific Publishing.

References

[1] Milne, F., and Longworth, D. (2020). Covid-19 and the Lack of Public Health and Government Preparation. QED Working Paper Number 1436.

[2] Milne, F., and Longworth, D. (2021). Parallels Between Financial Regulation Prior to the Global Financial Crisis and Lack of Public Health Preparation Prior to Covid-19. QED Working Paper Number 1455.

[3] Milne, F., and Longworth, D. (2020). Preparing for Future Pandemics: Stress Tests and Wargames. QED Working Paper Number 1437.

[4] Milne, F., and Longworth, D. (2021). Public Health and Government Preparations For Future Pandemics. QED Working Paper Number 1451.

QED economic projections behind new Canadian Shield COVID-19 policy proposal

Jan 2021 – Prof. Christopher Cotton, JDI Director and Jarislowsky-Deutsch Chair in Economic & Financial Policy, joined Global Canada’s COVID Strategic Choices group as the senior academic economist. The group worked to compare the costs and benefits of alternative COVID-19 mitigation and reopening scenarios being considered by federal and provincial governments across Canada to help guide policy. In December 2020, the group released a broad policy analysis and the “Canadian Shield” policy proposal, which has influenced the policy discussion across Canada.

The economic projections behind the analysis come out of an economic model developed by a team of Queen’s Economic Department and Limestone Analytics including Professors Huw Lloyd-Ellis, Christopher Cotton, and Bahman Kashi, along with Ph.D. candidate Frederic Tremblay and researcher Brett Crowley. The analysis provides economic projections based on epidemiological and policy projections that were being considered by the COVID Strategic Choices group. It shows how a stricter lockdown policy at the beginning of the year is likely to be less costly for the Canadian economy in the long run than a series of on-again, off-again lockdowns extending into spring and summer, suggesting that priority should shift away from a quick-as-possible reopening to instead focus on avoiding a third wave of lockdowns later in the spring.

For more information of the COVID Strategic Choices group and the Canadian Shield policy proposal: https://covidstrategicchoices.ca/

For various news articles related to the research:

Toronto Star. CBC Radio One, All in a Day with Alan Neal (https://www.cbc.ca/listen/live-radio/1-92-all-in-a-day/clip/15818252-why-longer-lockdown-benefit-economy)

TV & print: Global News coverage of the Canadian Shield proposal https://globalnews.ca/news/7555859/coronavirus-canada-third-wave-canadian-shield-approach/

Radio: Rob Snow Show coverage of The Canadian Shield proposal https://ottawa.citynews.ca/all-audio/the-rob-snow-show/hour-3-of-the-rob-snow-show-for-january-5-2021-3235699

Radio: Mike Farwell Show (today) coverage of the Canadian Shield policy proposal https://www.570news.com/audio/the-mike-farwell-show/

Chronicle Herald: https://www.thechronicleherald.ca/opinion/national-perspectives/john-ivison-a-bleak-winter-could-herald-a-grim-spring-537227/

Toronto Star: https://www.thestar.com/news/canada/2021/01/04/to-avoid-covids-third-wave-embrace-longer-lockdowns-gradual-relaxing-of-restrictions-group-urges-provinces.html

QED Faculty release new economic modeling dashboard to assess the impact of COVID-19

A new economic model to measure the impact of COVID-19 lockdown policies has been developed by members of the QED and Limestone Analytics including Professors Huw Lloyd-Ellis, Christopher Cotton, and Bahman Kashi, along with Ph.D. candidate Frederic Temblay and researcher Brett Crowley.

The model captures the interconnections between different industries and communities within Canada to project how restrictions on production or economic activity in one area spills over throughout the economy. The model can provide short-to-medium term projections, allowing policy makers to explore the economic costs to different communities or regions under alternative policy scenarios. 

The model was applied by Limestone Analytics and Local Intel to develop an Economic Impact Explorer to provide local and provincial policymakers access to the model’s projections. 

Read the Queen’s Gazette article: https://www.queensu.ca/gazette/stories/examining-covid-19-s-economic-impact-ontario

Explore the Eastern Ontario Leadership Council’s COVID-19 dashboard based on the model’s projections. http://www.eolc.info/en/working-groups-and-projects/covid-19-economic-modelling.aspx 

For more information on the economic model, please see the academic working paper.  

QED faculty named to the Royal Society of Canada COVID-19 Working Group on Economic Recovery.

Robin Boadway and Christopher Cotton were invited to participate on the RSC working group. Prof. Boadway is an Emeritus Professor and a leading authority on tax policy and basic income guarantees. Prof. Cotton is the Director of the JDI and the Jarislowsky Deutsch Chair in Economic Policy, and has been heavily involved in the modeling and analysis of COVID-19 lockdown policies since the beginning of the crisis. 

In December, the RSC working group released a Policy Briefing based on their work, “Renewing the Social Contract: Economic Recovery in Canada from COVID-19.” 

For more information of the RSC working group: https://rsc-src.ca/en/themes/economic-recovery

To read the report: https://rsc-src.ca/en/research-and-reports/covid-19-policy-briefing/renewing-social-contract-economic-recovery-in-canada

Ph.D. Students Receive Mitacs Grants for COVID Research

Five Queen’s Economics Department graduate students received rapid response research grants from Mitacs to work on COVID-19 research. Ph.D. students Ludovic Auger, Baiyou Chen, Rebecca Dafoe, Mahtab Hanzroh, and Nam Phan each received financial support to conduct research on different topics related to the impact of COVID-19 on economic outcomes over the summer of 2020.

The funding was secured by Professors Christopher Cotton and Huw Lloyd-Ellis with support from the Faculty of Arts and Sciences in order to support student engagement on the JDI’s COVID research team. Auger, Chen, Dafoe and Hanzroh are supervised by Prof. Cotton and Prof. Lloyd-Ellis, Phan is supervised by Prof. Brant Abbott.

QED economists receive a major Digital Technology Supercluster grant from the Canadian government.

A team of researchers from the Queen’s Economics Department is behind the economic projections for the $2.4 million Looking Glass project funded by Canada’s Digital Technology Supercluster that will bring together state of the art economic and epidemiological modeling into an online policy analysis dashboard. The objective is to allow decision makers to explore both the projected health and economic impacts of alternative lockdown and recovery policies.

The project represents a collaboration between epidemiologists from the Queen’s Mathematics Department, economists from the Queen’s Economics Department and Limestone Analytics, and industry partners Kings Distributed Systems, aiSight, and Distributed Compute Labs. At the heart of the economic analysis behind the project is an economic model developed by members of the QED and Limestone Analytics including Professors Huw Lloyd-Ellis, Christopher Cotton, and Bahman Kashi, along with Ph.D. candidate Frederic Temblay and researcher Brett Crowley.

For more information on the supercluster grant, please visit the supercluster site:

https://www.digitalsupercluster.ca/covid-19-program-page/looking-glass-protecting-canadians-in-a-return-to-community/

For more information on the economic model, please see the academic working paper.

https://www.econ.queensu.ca/sites/econ.queensu.ca/files/wpaper/qed_wp_1441.pdf