CREATE researchers continue their work on economic impacts and risk management of COVID-19, as well as their advisory roles. Please see the links below to the first report by a USC CREATE team stemming from the research project sponsored by the DHS Center for Accelerating Operational Efficiency (CAOE), and a recently published paper by one of our External Fellows. See also the list of recent media mentions and webinars on COVID-19. To read more about CREATE’s previous research into health threats also see below.
For more than a decade, researchers at CREATE, a joint research center between the USC Sol Price School of Public Policy and the USC Viterbi School of Engineering, have worked on analyzing various aspects of health threats such as their severity and timing, costs to healthcare, availability of vaccines, avoidance behavior, resilience and economic consequences. To read a report from the Price School of Public Policy click here.
Authors: Terrie Walmsley, Adam Rose, Dan Wei
Abstract: We estimate the macroeconomic impacts of mandatory business closures in the U.S. and many other countries in order to control the spread of the COVID-19. The analysis is based on the application of a modified version of the GTAP computable general equilibrium (CGE) model. We simulate mandatory closures in all countries or parts of countries that had imposed them as of April 7 for three-month and six-month cases. For the three-month scenario, we estimate a 20.3% decline of U.S. GDP on an annual basis, or $4.3 trillion. The employment decline of 22.4% in the U.S. for the three-month closure represents 35.2 million workers for that time period. Should the mandatory closures be extended to six months, these negative impacts slightly more than double. The employment impacts are slightly greater in percentage terms than the GDP impacts because most service sectors, which are generally more labor-intensive, are much more negatively impacted by the closures than are manufacturing sectors and other critical sectors. Our results should be considered upper-bound estimates given such assumptions as businesses laying off workers no longer paying them wages or salaries. Note also that the paper examines the mandatory closures alone and does not factor in any countervailing fiscal or monetary policies.
Authors: Gilberto Montibellar, Pratik Patel, Victor J. del Rio Vilas
Abstract: Multi-criteria assessments are increasingly being employed in the prioritisation of health threats, supporting decision processes related to health risk management. The use of multi-criteria analysis in this context is welcome, as it facilitates the consideration of multiple impacts of health threats, it can encompass the use of expert judgment to complement and amalgamate the evidence available, and it permits the modelling of policy makers’ priorities. However, these assessments often lack a clear multi-criteria conceptual framework, in terms of both axiomatic rigour and adequate procedures for preference modelling. Such assessments are ad hoc from a multi-criteria decision analysis perspective, despite the strong health expertise used in constructing these models. In this paper we critically examine some key assumptions and modelling choices made in these assessments, comparing them with the best practices of multi-attribute value analysis. Furthermore, we suggest a set of guidelines on how simulation studies might be employed to assess the impact of these modelling choices. We apply these guidelines to two relevant studies available in the health threat prioritisation domain. We identify severe variability in our simulations due to poor modelling choices, which could cause changes in the ranking of threats being assessed and thus lead to alternative policy recommendations than those suggested in their reports. Our results confirm the importance of carefully designing multi-criteria evaluation models for the prioritisation of health threats.
Media Mentions and Webinars of Research and Advising by CREATE
July 1, 2020
May 26, 2020
May 19, 2020
April 29, 2020
April 24, 2020
April 17, 2020
April 9, 2020
April 1, 2020
March 27, 2020
CREATE studies into health threats include:
Rosoff, H., John, R. S., Prager, F. 2012. Flu, risks, and videotape: Escalation of fear and avoidance behavior. Risk Analysis, 32(4), 729-743. doi: 10.1111/j.1539-6924.2012.01769.x
CREATE researchers conducted an experiment to learn about public reaction to an escalating flu epidemic. The study used a scenario simulation, in which 600 respondents in Southern California and the DC Metro Area were shown a series of 7 videos describing a hypothetical escalating crisis over a 15-day period. Two aspects of the scenarios were manipulated: cause and proximity of the epidemic. Respondents were told the epidemic was caused by terrorists, by a laboratory accident, or an unknown origin. Respondents were also told the epidemic was either in their same location or in a location on the opposite coast. Perceptions of risk, fear, and avoidance behavior all increased dramatically over the 7 episodes, regardless of indicated cause or proximity. Although the overall levels of these factors were similar for the 3 cause conditions, the trajectory of increase was steeper in all 3 for the unknown cause compared to either terrorism or laboratory accident. The behavioral factors increased more rapidly when the epidemic was in the respondents’ geographic region . Public response to the epidemic was remarkably similar across different demographic groups. These results suggest that perceived risk, fear, and avoidance behavior are attenuated when the origin of the epidemic is known and the epidemic is perceived as far away.
Prager, F., Wei, D., and Rose, A. 2017. Total Economic Consequences of an Influenza Outbreak in the United States, Risk Analysis 37(1): 4-19. doi:10.1111/risa.12625
Pandemic influenza represents a serious threat not only to the population of the United States, but also to its economy. This study analyzed the total economic consequences of potential influenza outbreaks in the U.S. for four cases based on the distinctions between disease severity and the presence/absence of vaccinations. The analysis was based on data and parameters on influenza obtained from the Centers for Disease Control and the general literature. A state-of-the-art economic impact modeling approach, computable general equilibrium (CGE), was applied to analyze a wide range of potential impacts stemming from the outbreaks. The study examined the economic impacts from changes in medical expenditures and workforce participation, and also took into consideration different types of avoidance behavior and resilience actions not previously fully studied. The results indicated that, in the absence of avoidance and resilience effects, a pandemic influenza outbreak could result in a loss in U.S. GDP of $25.4 billion, but that vaccination could reduce the losses to $19.9 billion. When behavioral factors are taken into account, the GDP impacts more than doubled to $58.8 billion without vaccination and $45.1 billion with vaccination. However, resilience tactics, especially the abilities of U.S. firms to recapture lost production after workers return, help reduce the GDP losses by nearly 25%. The results indicated the importance of including a broader set of causal factors to achieve more accurate estimates of the total economic impacts of not just pandemic influenza but biothreats in general. The results also highlighted a number of actionable items that government policymakers and public health officials can use to help reduce potential economic losses from the outbreaks. For example, efforts to influence avoidance behavior through public messaging and information campaigns and various incentives may hold the potential tor greatly reduce the economic costs of an influenza outbreak at a relatively low cost.
Rose, A., Asay, G., Wei, D., and Leung, B. 2009. Macroeconomic Impacts of Shutting Down the U.S. Borders in Response to a Security or Health Threat, Chapter 13 in H. Richardson, P. Gordon, and J. Moore, II (eds.), Global Business and The Terrorist Threat. Cheltenham, UK: Edward Elgar.
A coordinated terrorist attack or major health threat may raise the consideration of a partial or complete shutdown of the U.S. borders to people and commodities. Given that the U.S. economy is highly dependent on international mobility and trade, the economic impacts of a partial or total border closure are likely to be significant. This study used a macroeconometric forecasting model from Regional Economic Models, Inc. (REMI) to analyze disruptions to both imports and exports, international travel bans to both inbound and outbound traffic, and a halt of both documented and undocumented migrants. The simulations of a complete shutdown of the borders to both trade and people for one year predicted a reduction in GDP of as much as $1.4 trillion measured in 2006 dollars, or about 10.5% of GDP. Employment losses were predicted to be more than 22 million, or more than 12%below base levels.. The two major factors affecting the results were export and import shutdowns. Curtailment of international travel is a far smaller influence but still significant, while a halt in in-migration had negligible effects on the results. The estimates in this study should be considered upper bounds because of the omission of adaptive resilience tactics by businesses and countervailing government policies.. Also, the study focused entirely on the cost side of the ledger. A complete assessment of the decision to close the U.S. borders needs to also consider the benefits of that action (e.g., avoided losses from a health emergency), with due consideration of the risk involved (the probability of occurrence of the threat).
Dixon, P., J. Giesecke, M. Rimmer, and A. Rose. 2011. The Economic Costs to the U.S. of Closing Its Borders: A Computable General Equilibrium Analysis, Defence and Peace Economics 22(1): 85-97 doi.org/10.1080/10242694.2010.491658
This study provided an update and an extension of the 2008 study using a computable general equilibrium (CGE) model, in particular the U.S. Applied General Equilibrium Model (USAGE), developed by CREATE Senior Research Fellow, Peter Dixon. It too simulated the effects of a one-year U.S. border closure. The analysis suggested that the costs of a prolonged closure could be much greater than indicated by previous studies. The study found that cutting all imports by 95% in a context of sticky real wages would reduce U.S. GDP by 48%. However, if bottleneck imports (mainly oil) were exempt and workers accepted real wage cuts, then the GDP reduction would be only 11%. Again, the analysis represented an upper bound, because it did not consider various types of offsetting effects resilience.
Dixon, P., M. Rimmer, B. Lee, A. Rose et al. 2010. Effects on the U.S. of an H1N1 Epidemic: Analysis with a Quarterly CGE Model, Journal of Homeland Security and Emergency Management 7(1): Article 7. doi.org/10.2202/1547-7355.1769
This study simulated the effects of a hypothetical H1N1 epidemic in the U.S. using a quarterly version of the USAGE model. Quarterly periodicity was able to capture the short-run nature of an epidemic. The study found potentially severe economic effects in the peak quarter, but, averaged over the epidemic year, the effects were considerably damped. The results indicated that the macroeconomic consequences of an epidemic are more sensitive to demand-side effects, such as reductions in international tourism and leisure activities, than to supply-side effects, such as reductions in productivity. This suggests that demand stimulus policies might be an appropriate economic response to a serious epidemic. However, as in the previous studies omit considerations of resilience, as well as considerations of “avoidance behavior" included in subsequent CREATE studies.
Manheim, D., H. H. Willis, S. R. Shelton, R. Vardavas, and H. Rosoff. 2015. Understanding Biosurveillance Value of Information using an Exploratory Tool. CREATE Working Paper.
Rose, A., D. Wei, F. Prager and S. Rao. 2015. Modeling the Temporal and Spatial Consequences of Radiological and Nuclear Terrorism Events. CREATE Report to the National Biosurveillance Integration Center.
Oladosu, G., A. Rose, and B. Lee. 2013. Economic Impacts of Potential Foot and Mouth Disease Agro-terrorism in the United States: A Computable General Equilibrium Analysis, Journal of Biothreats and Biodefense S12: 001. doi:10.4172/2157-2526.S12-001
Additional studies by CREATE researchers included a report to the National Biosurveillance Integration Center (NBIC) on the value of information and on economic consequence analysis of health threats. The latter served as the basis for the Pandemic Module of CREATE's Economic Consequence Analysis Tool (E-CAT), see: url from website. Another study examined the economic impacts of a US Foot and Mouth Disease epidemic, whose major impacts would be transmitted by a steep reduction in exports of US beef products.
CREATE researchers are well positioned to perform analyses of the economic consequences of the coronavirus based on their prior research specific to health threats, as well as research on the use of major economic models to simulate behavioral responses to numerous types of threats, and resilience in business continuity. CREATE is also strengthening its ties with USC's Schaeffer Center for Health Economics and Policy based on a recent collaborative study on the economic impacts of the California Institute for Regenerative Medicine (CIRM) on the economy of the state and the U.S. as a whole.