2022/04 | LEM Working Paper Series | ||||||||||||||||
A regional Input-Output model of the Covid-19 crisis in Italy: decomposing demand and supply factors |
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Severin Reissl, Alessandro Caiani, Francesco Lamperti, Tommaso Ferraresi and Leonardo Ghezzi |
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Keywords | |||||||||||||||||
Input-output; Covid-19; Lockdown; Italy; Demand and Supply Shocks.
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JEL Classifications | |||||||||||||||||
C63, C67, D57, E17, I18, R15
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Abstract | |||||||||||||||||
We extend the regional input-output model for the economic impact assessment of
Covid-19 lockdowns in Italy proposed in Reissl et al. (2021) by incorporating the
effects of changes in mobility on the level and composition of consumption demand.
We estimate the model on sectoral data for 2020 and perform an out-of-sample
validation exercise for the first half of 2021, finding that the model performs well.
We then evaluate the relative importance of demand- and supply-side factors in
determining our simulation results. During the national lockdown of spring 2020
the impacts of supply-side (labor) shocks can account for the vast majority of output
losses. In the following stages of the epidemic income and mobility-related effects
on final demand play pivotal roles at the aggregate and regional levels, as well as for
most sectors. While policies supporting demand may hence be appropriate, their
effectiveness may be hampered when demand is chiefly restrained by the mobility-related effect, and not by income.
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