The Unequal Effects of COVID-19 Across Countries

I evaluate the effects of COVID-19 across countries. Where income is low, fewer jobs can be performed from home, the hospital capacity is lower, and enduring long periods with no income is harder, making the crisis more dire. On the other hand, younger populations make death less likely in low income countries. To study the overall effect, I extend the SIR model in Eichenbaum et. al (2020c), with a subsistence level of consumption, work-at-home possibilities, hospital capacity constraints, and a death rate that depends on the age distribution. I find that in low income countries infections are larger, but there are no differences in the death rate because of their younger populations. A reduction in income per capita of 1% increases infections by 330 people per million. The fall of consumption relative to steady state increases by 0.03% per percentage point increase in income. Using Google mobility data, I confirm that traffic around workplaces has fallen more in rich countries, consistent with the theory. Social distancing policies are ineffective to reduce inequality. A better strategy would consist of loans to finance imports: assuming an interest rate of 5%, the optimal loan would reduce the elasticity of infections to GDP by 10%. In addition, loans are cheaper in low income countries: they range from a present value under $200 per capita in Ecuador to almost $5,000 in Ireland