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Assessing the effect of the COVID-19 pandemic on wellbeing

Working Paper 2024-662

Abstract

To mitigate the spread of COVID-19, from March 2020 worldwide were adopted a series of policy interventions aimed at reducing interpersonal contact and implementing testing to identify infectious cases early.By comparing the evolution of the pandemic under policy intervention versus inaction by policymakers, it is possible to define the feasible cost bearing to reduce the death number and other negative effects of the COVID-19 by adopting two approaches: a cost-benefit analysis (CBA) and a social welfare function analysis (SWF).This paper aims at showing how the social welfare function and the cost-benefit analysis can be applied to assess the COVID-19 pandemic policies’ impacts on wellbeing, also considering the heterogeneous effects by age and income groups. As a case study that compares both approaches, we refer to those conducted by Adler et al. (2020) and Ferranna et al. (2021) in the USA, implementing the COVID-19 pandemic simulator developed by Fleurbaey et al. (2020). Analysing various scenarios, the CBA approach endorses more costly policies than the SWF approach to remove the pandemic risk. Moreover, the findings consistently favour controlled policies (e.g., suppression or mitigation) over uncontrolled ones, regardless of the evaluation method used.Finally, as a potential theoretical contribution, we explore how the impact of an individual’s trust in different agents (i.e., social trust and political trust) and the risk perception may impact the level of adherence to control policies aimed at preventing the spread of the COVID-19 pandemic.

Authors: Enza Simeone.

Keywords: Cost-benefit analysis, Social welfare function, COVID-19, wellbeing, trust, policy evaluation
JEL: D61, I18, I38