Tag: COVID19

Female Representativeness and Covid-19 Policy Responses: Political Representation and Social Representativeness

20210928 Female Representativeness and Covid-19 Policy Responses Image 01

There is anecdotal evidence that countries with female leadership in policymaking are more efficient in combating the Covid-19 pandemic. This paper studies whether countries with high female representativeness in political and social layers respond differently to the Covid-19 outbreak. We explore patterns at a cross-country level, which enables us to consider the variation of gender implicated institutions. Our findings indicate that it is women’s social representation, rather than female political leadership, that has the potential to capture cross-country variation in Covid-19 policy responses. Our study confirms that well-functioning and effective institutions are not established from the top-down but rather from the bottom-up.

Introduction

In light of the Covid-19 outbreak and the resulting actions developed and implemented by countries worldwide, questions have been raised about government policy responses and what can trigger them. The pandemic brought forward the need for measures that help mitigate the spread of the virus such as hand washing, reduced face touching, face mask policies, and physical distancing. In many countries, the implementation of lockdowns and social distancing measures had a large impact on employment, including reductions in working hours, furloughs, and work from home arrangements (Brodeur et al., 2020; Coibion et al., 2020; Gupta et al., 2020). There are notable concerns about the potential damage non-pharmaceutical interventions can inflict on economies and labor markets (Andersen et al., 2020; Kong and Prinz, 2020). Further, the implementation of these measures requires certain institutional and individual behavioral changes. While some countries were successful in developing and implementing policy responses that addressed the challenges of the pandemic, others have experienced considerable difficulties.

There is anecdotal evidence suggesting that countries with female leadership in governmental policies are more efficient in combating the Covid-19 pandemic. Several articles from prominent media outlets, such as CNN, The Conversation and Forbes, hypothesize that female leaders are systematically better at managing the pandemic and that this divergence can be attributed to gender differences in management style and risk-taking behavior.

This policy paper explores whether countries distinguished by higher female representation in government policies, both in development and implementation, responded differently to the Covid-19 outbreak, and if so, how the response differed from other countries. For this purpose, we identify two layers of female representation: political representation and social representativeness. The layer of political representation considers the role of women’s representation in public policy design and implementation at the top level of executive and legislative institutions. Social representativeness captures women’s representativeness in different layers of society and spheres of life. It reflects social norms, legal inequality between men and women in different spheres of private, economic, and business life, as well as realized gender inequality, e.g., in labor market participation, education, or local leadership.

With respect to political representation, we address the question of whether countries distinguished by a higher female representation at top executive and legislative levels differ in terms of policy responses to Covid-19. With respect to social representativeness, we aim to capture the variation in these responses that may originate from differences in the expected reaction of the public, which in turn is driven by women’s representativeness in different layers of society. We derive evidence-based conclusions capturing the role of female leadership at the country’s executive and legislative level, as well as the role of gender representativeness in other layers and institutions of society.

The motivation for this research stems from the extensive literature on differences in values and social attitudes between men and women. For example, women have been shown to be more trustworthy, public-spirited, and likely to exhibit ‘helping’ behavior (Eagly and Crowley, 1986), vote based on social issues (Goertzel, 1983), score better on ‘integrity tests’ (Ones and Viswesvaran, 1998), take stronger stances on ethical behavior (Glover et al., 1997; Reiss and Mitra, 1998) and behave more generously when faced with economic decisions (Eckel and Grossman, 1998). Thereby, one may ask to which extent these differences transmit to public policies in societies where women are better represented, either politically or socially. While our study primarily concerns Covid-19 policy responses, we discuss other related literature on the relationship between women’s representativeness and public policy in the next section.

Our analysis shows that it is the women’s social representativeness layer, which can explain government reactions to the Covid-19 pandemic. This goes in line with the institutionalist literature, suggesting that more a gender-balanced character of institutions translates into policy measures and related outcomes. With this finding, our study suggests further evidence on the central role of institutions. Consistent with the existing evidence, we claim that well-functioning and effective institutions are not established from the top-down, but rather from the bottom-up (Easterly, 2008; Dixit, 2011; Greif, 2006). In such institutions, women’s participation in labor markets, businesses, and other spheres is essential as these are factors that distinguish countries in their response to the pandemic. While the evidence provided is suggestive, it opens further avenues for studies to assess causal relationships.

Covid-19 Policy Measurements

To conduct our analysis, we collect data from a number of different sources. For data on the Covid-19 situation and government policy responses, we use the Our World in Data portal. This online platform compiles a number of data sources, most of them updated on a daily basis. Statistics on female participation and leadership is retrieved from the World Bank and UNDP. Summary statistics of the variables are reported in Table A1 of the Appendix.

The policy response variables are based on a number of different measures implemented by national governments. These are aggregated into three composite indices: Stringency, Containment & health, and Economic support. (The index methodology can be found here.) We present the components of the three indices in Table 1 and a detailed description of the policy measures and their scoring in Appendix C.

As seen in Table 1, the Stringency and Containment & health indices have some common dimensions; containment & closure policies (C1 – C8) and public information campaign (H1). Both are rescaled to a value from 0 to 100 (100 = strictest). The Economic support index records measures such as income support and debt/contract relief and does not share any common dimensions with the other two policy response indices. The scale of the index also ranges from 0 to 100 (100 = full support). The extent of heterogeneity in government policy responses across countries is illustrated in Figures 1 – 3. While containment and closure policies are stricter in many Asian and Latin American countries, economic support is more extensive in many European countries, Canada, New Zeeland, and few other countries.

 Table 1. The structure of the Covid-19 policy measurements.

Note: Categories and assigned values of policy measurements are in Appendix C.

Figure 1. Stringency Index

Note: A choropleth map shows countries/territories by their Stringency index score, based on data collected from the portal of https://ourworldindata.org/policy-responses-covid. Countries are grouped into five groups (quantiles), from the lowest to the highest values of the index.

Figure 2. Economic support index.

Note: A choropleth map shows countries/territories by their economic support index score, based on data collected from the portal of https://ourworldindata.org/policy-responses-covid. Countries are grouped into five groups (quantiles), from the lowest to the highest values of the index.

Figure 3. Containment & health index.

Note: A choropleth map shows countries/territories by their Containment and health index scores, based on data collected from the portal of https://ourworldindata.org/policy-responses-covid. Countries are grouped into five groups (quantiles), from the lowest to the highest values of the index.

Female Representativeness: Layers and Indicators

Multiple studies in economics and political science suggest that the gender of public officials shapes policy outcomes (Chattopadhyay and Duflo, 2004; Iyer et al., 2012; Svaleryd, 2009). Evidence suggests that increasing the number of women in higher ranks of public administration (legislative bodies and ministries) has a substantial impact on the political office and policymaking (Borrelli, 2002; Davis, 1997; Reynolds, 1999). On the other hand, a number of studies demonstrate that gender has no association with policy outcomes (Besley et al., 2007; Besley and Case, 2003; Bagues and Campa, 2021). The role of the institutional setting and environment can, thus, be decisive in this regard. Women are also found to be more concerned about social policy issues and prefer higher social spending than men (Lott and Kenny, 1999; Abrams and Settle, 1999; Aidt and Dallal, 2008). Further, women are more likely to use a collective or consensual approach to problem and conflict resolution rather than an approach founded on unilateral imposition (Rosenthal, 2000; Gidengil, 1995).

In our study, the political representation layer is measured as female leadership at a country’s executive level (representation in government cabinets) and participation at the legislative institution (parliament) level. To assess this, we consider the following indicators: 1) the presence of a female president or prime minister and proportion of women in ministerial positions, and 2) women’s representativeness in legislative bodies measured as the proportion of seats held by women in national parliaments. The variation of these indicators across countries is illustrated in Figures B4 – B6 in the Appendix.

Our approach to social representativeness is in line with social role theory. This framework provides a theoretical explanation of a structural approach to gender differences (Eagly, 1987; Eagly and Karau, 2002; Wood and Eagly, 2009). It claims that men and women behave according to stereotypes associated with the social roles they occupy, and these differences can, in turn, influence the role of women in local governance and leadership. In line with other research on gender, the social role theory proposes a rigorous framework for analyzing the gendered aspect of government organizations. For instance, evidence shows that women tend to be more collaborative and democratic, hence demonstrating a more caring and community-oriented behavior (Eagly and Johannesen-Schmidt, 2001).

The gender aspect of local governance indicates that the personal preferences and opinions of leaders predominate and shape policymaking (Besley and Coate, 1997). Female leaders (including municipality heads) are more inclined to favor the inclusion of citizens in the decision-making process (Fox and Schuhmann, 1999; Rodriguez-Garcia, 2015), implying that the society is a more informed and engaged stakeholder in the public policymaking (Ball, 2009).  Given that municipalities are taking on a greater and more interactive role in citizens’ well-being, they become a key channel in reinforcing trust in government. Furthermore, the literature finds an interrelationship between female voters and government outcomes, whereby women’s enfranchisement affects government size and spending (Lott and Kenny, 1999; Miller, 2008, Aidt and Dallal, 2008). As such, this can lead to improvements in government outcomes and policy effectiveness. The evidence from Bloomberg’s Covid-19 Resilience Ranking suggests that success in containing Covid-19 while minimizing disruption appears to rely more on governments fostering a high degree of trust and societal compliance.

Furthermore, the patterns of gender relations in societies reflect formal and informal institutional rules and policies. Gender equality enhances good governance and helps to further improve relationships between government and citizens (OECD 2014). Similarly, Elson (1999) argues that labor markets are structured by practices, norms, and networks that are “bearers of gender”. Societies with better legal frameworks for women have more balanced gender participation in labor markets, governance, and leadership, along with more equal gender roles and less gender-biased stereotypes. We anticipate that better representation of women in policymaking in such societies is also reflected in the choice and effectiveness of Covid-19 policy measures.

Building on the above theories explaining the relevance of women’s representativeness in diverse societal layers for policy development and implementation, we identify three indices that have the potential to capture the effect of social representativeness – Women, Business and the Law index (WBLI), Gender Development Index (GDI) and Gender Inequality Index (GII). The WBLI is composed of eight indicators, covering different areas of the law related to the decisions women make at various stages of their career and life. These indicators include mobility, workplace, salary, marriage, parenthood, entrepreneurship, assets, and pension. Hyland et al. (2020) show that, globally, the largest gender inequalities are observed in the areas of pay and parenthood. That is, women are most disadvantaged by the legal system when it comes to compensation and how they are treated once they have children. The index scales from 0 to 100 (100 = equal opportunities). The diagram in Figure 4 illustrates how the components of the WBLI index measure key activities of economic agents throughout their life.

Figure 4. The linkages of 8 indicators in Women, Business and the Law index (WBLI)

Source. Women, Business and Law, 2020. World Bank Group.

The second index, the GDI, measures gender inequality in the achievements in three basic dimensions of human development: Health, measured by life expectancy at birth; Education, measured by expected years of schooling for children and mean years of schooling for adults aged above 25; and Command over economic resources, measured by estimated earned income.  The same dimensions are included in the Human Development Index (HDI), and the GDI is defined as the female-to-male HDI ratio (i.e. perfect gender equality corresponds to a GDI equal to one).

Turning to the third index measuring social representativeness, the GII reflects gender-based disadvantages in the following dimensions—reproductive health, empowerment, and the labor market. The index measures the loss in potential human development due to gender inequality in achievements across these dimensions. It ranges from zero, where women and men fare equally, to one, where one gender fares as poorly as possible in all measured dimensions. One of the dimensions of the GII, women’s empowerment, has a sub-dimension – “Female and male shares of parliamentary seats”, one of our indicators measuring political representation. Generally, we do not consider the two layers being as mutually exclusive, but intersections are expected to be minimal.

Central to our study, the three indices capturing social representativeness in a country encompass the institutional quality of its society from a gender development perspective. The distribution of each index across countries is shown in Figures B1 – B3 (See Appendix B).

Women’s Representativeness and Covid-19 Policy Responses: Partial Correlation Analysis

In this section, we explore the relationship between Covid-19 policy responses and the measures of political representation and social representativeness. For this purpose, we explore (i) correlations between the indicators and indices of the political and social representation layers and (ii) partial correlations between these measures and policy response indices.

We start with a correlation analysis of the different indicators in the layers. It shows that the WBLI is in high correlation with other representativeness variables. This index captures the legal equality between women and men which has been shown to be “associated with a range of better outcomes for women, such as more entrepreneurship, better access to finance, more abundant female labor supply, and reductions in the gender wage gap”. (WB, 2021). One can think of the GDI and GII indices, as well as the political representativeness indicators, as reflections of a broad policy framework in diverse areas of social, business, and legal activities. A legal environment that promotes gender equality, even if not sufficient by itself, is likely to lead to progress in these areas. Indeed, Hyland et al. (2020) show that greater legal equality between men and women is associated with a lower gender gap in opportunities and outcomes, fewer female workers in vulnerable positions, and greater political representation of women. This way, the WBLI may capture key predispositions for women’s representativeness in society. Further, Hyland et al. (2021) show that the WBLI index is in high (partial) correlation with country GDP per capita, polity score, legal origin, religion and geographic characteristics. This evidence suggests that the WBLI may have the capacity to reflect important country characteristics which ultimately shape cross-country institutional variation.

Table 2. Scatterplot table for GDI, GII and Women, Business and the Law Index, Proportion of seats in parliament held by women and Proportion of ministerial seats held by women.

Note: Scatterplots are constructed for 149 countries. Fitted lines are based on a quadratic function, shaded areas indicate 95 percent confidence intervals and country population is used for weights applied for fitted lines and bubbles. For each scatterplot, correlation coefficients and their significance are reported. *** p<0.01, ** p<0.05, * p<0.1.

Next, we explore partial correlations of these indicators with Covid-19 policy responses (Table 3). In this analysis, we control for a number of factors that potentially confound the relationship between a particular policy response and representation layer. Specifically, we control for (i) the number of infected cases per million inhabitants, (ii) the number of deaths per million, (iii) GDP per capita, and (iv) life expectancy. The number of infected cases and deaths enter the model in order to control for country differences in the spread and consequences of the virus. GDP per capita captures the stage of country development, accounting for cross-country differences in resource capacities and constraints. Both of these control variables are claimed to have an important role in Covid-19 related research (Coscieme et al., 2020; Aldrich and Lotito, 2020; Elgar, Stefaniak and Wohl, 2020; Gibson, 2020; Conyon and Thomsen, 2020). Life expectancy is an important proxy for country inhabitants’ resilience against the virus, conditioned by health and health infrastructures.

Significant correlations are observed between the WBLI and the three policy response indices. The correlation between the WBLI and Stringency (and Containment & health) index is negative, implying that lighter restrictions have been imposed in countries with better business and legal conditions for women. A positive correlation is observed between the WBLI and the economic support index, suggesting that countries with better conditions for women in diverse business and societal areas have provided more extensive economic support in the pandemic. This finding is in line with existing evidence showing that women are more concerned about social policy issues and prefer higher social spending than men (Lott and Kenny, 1999; Abrams and Settle, 1999; Aidt and Dallal, 2008). Also, lighter restrictions and more generous economic support do not presume any trade-off in terms of the allocation of financial resources constrained by a state budget.

Interestingly, we do not observe significant correlations between policy responses and other indicators of women’s representativeness. The only exception is a correlation between GDI and the Containment & health index, which is significant at the 10% level and hinges heavily on two outliers (if we drop the two outliers, the P-value of the correlation increases from 0.0931 to 0.2735).

Table 3. Scatterplots of policy responses and social representativeness and political representation variables.

Note: Scatterplots are constructed for 133 countries. Fitted lines are based on a quadratic function, shaded areas indicate 95 percent confidence intervals and country population is used for weights applied for fitted lines and bubbles. Correlation coefficients are reported with significance levels: *** p<0.01, ** p<0.05, * p<0.1.

In our partial correlation analysis, we do not control for the direct effects of the gender dimension of social norms and practices. Social norms, practices, as well as informal and formal rules can, however, explain a substantial part of the gender gap (Hawkesworth, 2003; Mackay, 2009; Franceschet, 2011; Elson, 1999; Froehlich et al., 2020) relevant for making decisions. Our measures of women’s political and social representativeness do not fully cover gender differences in norms and practices. As Hyland et al. (2020) point out, de-jure female empowerment does not necessarily translate into de-facto empowerment, especially in countries with social norms and informal rules that result in low representation of women in diverse societal spheres. The authors indicate that laws are actionable in a short period, while more time is needed to bring changes in social norms.  In our paper (Grigoryan and Khachatryan, 2021), we attempt to address this issue by incorporating the Social Institutions and Gender Index (SIGI) into the model and evaluating the confounding effect on the covariates of the model. We show that the WBLI captures the effect of the gender gap owing to social norms and practices on Covid-19 policy responses as measured by SIGI. This result suggests that the endogeneity arising from the omission of a measure of such a gender gap is likely to be minimal.

Discussion and Conclusions

Our correlation analysis suggests that it is the layer of women’s social representativeness that can explain the policy reactions of governments in times of the Covid-19 pandemic. This result is in line with the institutionalist literature on gender inequality and social role theory, which suggests that a more gender-balanced character of institutions translates into policy measures and related outcomes. Among the three indices constituting the social representativeness layer, the WBLI is, by construction, more inclusive in terms of capturing women’s role in diversified societal areas. From Table 2, we observe that the WBLI is the only index that is in strong correlation with all other indicators. We also identify strong dominance of the WBLI in correlations with policy responses: it is the only indicator that is significantly correlated with all three policy response measurements (Table 3).

To conclude, our results establish an association between female social representativeness, as measured by the (legal) equality of opportunities between men and women, and Covid-19 related policies. One potential interpretation of these findings concerns the central role of the gender balance in different institutions and layers of society in understanding policy responses to the Covid-19 pandemic. While it was parliaments and governments that implemented policies, we find that the measures undertaken correlate more strongly with factors related to the social representativeness of women rather than those related to their political representation. This suggests a dominant role of gender-balanced institutions at the ‘grass root’ level in terms of the scale and scope of the crisis response. Naturally, these institutions may result (or be correlated) with more gender-balanced political representation, but the latter alone is not helpful in explaining the variation in the reaction to the pandemic.  These results underline the importance of balanced gender representation in the labor market, business, and other spheres of social life.  Further investment and development of ‘grass root’ institutions that improve women’s socioeconomic opportunities, could provide a fundamental foundation for policy development in a crisis situation.

There could also be alternative interpretations of our findings. There is rich evidence that the gender dimension is deeply implicated in institutions (Acker, 1992; Chappell and Waylen, 2013; Lovenduski, 2005). Gender norms and gender practices have been shown to have an influence on the operation and interaction between formal and informal institutions (see, for instance, Chappell, 2010; Krook and Mackay, 2011; Chappell and Waylen, 2013) and the gender dimension of political institutions is reflected in their practices and values, hence affecting their outcomes (such as laws and policies), formation, and implementation (for instance, Acker, 1992). In turn, governmental policies and rules shape societal norms and expectations. These considerations imply that our results could be driven by the overall values, culture, and institutions of respective societies. These factors would both result in a more gender-neutral legal environment and ‘grass-root’ institutions, and ultimately, distinguish countries in their response to the Covid-19 pandemic. In this way, our results open an avenue for future studies in this important domain to better understand the causality of observed relationships.

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(The Appendix can be found in the PDF version of the brief)

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Dimensions of Well-being

20210920 Dimensions of Well-being Image 01

This brief summarizes the insights shared in the online workshop “Dimensions of Well-being“, where participants presented and discussed their latest research relating to the dimensions of well-being. The two-day workshop was organized by the Stockholm Institute of Transition Economics (SITE) as part of the Forum for Research on Gender Economics (FROGEE) and took place on 28-29 June, 2021.

Introduction

It has been roughly 18 months since the first cases of Covid-19 were reported in Europe. So far the total number of deaths worldwide has passed 4.4 million (John Hopkins University, 2021), unemployment is trending upward in most countries (ILOSTAT, 2021), roughly half of the world’s students have been affected by school closures (UNESCO, 2021), and an alarming increase in domestic violence has been reported across the globe (UN Women, 2020).

It is safe to say that this pandemic crisis has had a multifaceted impact on our lives. Identifying what factors contribute to overall well-being and understanding how they interact with one another is central in designing and implementing solid and effective recovery policies.

Stockholm Institute of Transition Economics invited international experts to an online workshop where they discussed and presented their recent research relating to the dimensions of well-being. The workshop was organized as part of the Forum for Research on Gender Economics (FROGEE).

Well-being in a Pandemic

The government response policies intended to contain the spread of Covid-19 have undoubtedly had a major impact on society. However, estimating the overall effect of these policies on individuals’ well-being is not necessarily straightforward. Economic support policies likely have a positive effect on income and decrease poverty. But at the same time, other responses such as lockdowns and mobility restrictions may not only have an opposite effect on these outcomes but also influence other known determinants of well-being such as social life or education.

Anthony Lepinteur, researcher at the University of Luxembourg, presented his recent work on the well-being consequences of the pandemic policy responses in Germany, France, Spain, Italy, and Sweden. Lepinteur and co-authors link survey data on subjective well-being measures to data on government economic policy and stringency indices. The former index records financial policies such as income support, furlough schemes, and debt relief while the latter measures the strictness of Covid-19 containment and closure policies. The results show that more stringent policies reduce life satisfaction, and this negative effect is stronger for women, the unemployed, and those with relatively high incomes. Economic support policies are found to have no significant impact on reported life satisfaction.

As many countries have experienced major disruptions in many sectors of their economy, concerns have been raised about deteriorating labor markets and the effect this might have on living conditions and, ultimately, the well-being of individuals. Knar Khachatryan, associate professor at the American University of Armenia, shared research studying the impact of Covid-19 on multidimensional deprivation from labor market opportunities in Armenia. Knachatryan and co-authors base their analysis on two surveys from 2018 and 2020. To measure labor market opportunities, they adopt the “Alkire-Foster method” to develop a multidimensional index of labor market deprivation – a basket of indicators explaining an individual’s degree of labor market opportunities (e.g. education, employment status, income, type of work contract, and union membership). With respect to this index, they find that education is the most important determinant of multidimensional labor market deprivation – those having less than a bachelor’s degree are very likely to be deprived in terms of labor market opportunities. The results also show that the pandemic has widened the gender gap in labor opportunities. The number of people classified as deprived has increased more for women than men during the pandemic. This is primarily because women experienced stronger income reductions and more frequent job losses.

Thesia Garner, researcher at the U.S. Bureau of Labor Statistics, discussed how ex-ante levels of well-being have affected the outcomes of economic support policies during the pandemic. More specifically, her study investigates the role of individual’s well-being in determining their reported use of economic impact payments (EIP) in the U.S. Garner and co-author assess well-being using both objective measures (e.g. income sources, employment status) and subjective ones (e.g. depression, financial difficulty, expectations about job-loss or eviction). The findings show that those who report lower levels of subjective well-being are more likely to use the EIP to pay off debt, and this likelihood increases as the well-being measures worsen. Respondents who report having experiences of financial difficulty and negative expectations about the economy are more likely to spend the stimulus on nondurables and tend to allocate it to a wider range of spending categories.

In contrast to the U.S. and most other countries in the world, Belarus’ government offered very little support to its citizens during the pandemic. Lev Lvovskiy, researcher at BEROC, presented findings on how different sectors of the Belarusian economy and society were affected by the pandemic. Using the BEROC/Satio survey data, Lvovskiy and co-authors examine that the country still had sharp drops in mobility and economic shocks mainly caused by lockdowns of major trade partners. The pandemic significantly increased the probability of income reductions and they show that financial distress associates with the incidence of depression of Belarusians.

Gender and Wellbeing

Another central topic discussed at the workshop concerned the gender aspects of well-being and other related topics from gender economics.

An essential channel through which gender differences in well-being can arise is unequal representation in politics. Sonia Bhalotra, professor at the University of Warwick, presented a study on the relationship between maternal mortality and women’s political power in 174 countries. Maternal mortality is the leading cause of death and disability for women aged 15-44, and significantly higher in low-income countries – at levels similar to what high-income countries had in the early 1900s. Bhalotra and co-authors document that the costs of providing access to prenatal health services, antibiotics, and skilled birth attendance are relatively low. They therefore argue that there are likely other barriers to adopting these solutions. Male policymakers might have a weaker preference for preventing maternal mortality or less information on its prevalence and treatment. To gain insight, the authors use a staggered event-study approach and study the effect of gender quota implementations on the maternal mortality ratio (MMR, maternal mortality per birth). They find that, in countries that adopted quotas, the MMR declined by 10% following implementation, and this effect is stronger for larger quotas. Focusing on the mechanisms, the results show that gender quotas lead to a 5-8 percentage point (p.p.) increase in skilled birth attendance, a 4-8 p.p. increase in prenatal care utilization, 6-7 % decline in birth rates, and an increase in girl’s education by 0.5 years.

Elizaveta Pronkina, researcher at Université Paris-Dauphine, also shared findings relating to gender and politics but from a historical perspective.  Her research studies historic institutional differences across communist regimes and women’s work experiences. The paper focuses on Lithuania and Poland, two countries that experienced different gender policies under a communist regime. After the second world war, Lithuania was controlled by the central government of the Soviet Union while Poland’s government was able to preserve its independence although being part of the Soviet bloc. Based on anecdotal evidence, the two countries had the same religious and political policies but different enforcement – Lithuania faced a hard and Poland a soft form of communism. To isolate the impact of the Soviet policies on women’s life decisions and account for differences in the countries’ pre-communist era, the authors only include regions that were part of the Russian empire until the end of the first world war. The findings show that women living under the Soviet regime were more likely to educate themselves and have on average two additional years of work experience (by 50 years of age).

A productive environment and reliable social interactions at work are also likely to be formative elements of people’s well-being, and gender might factor in here. Yuki Takahashi,  PhD candidate in economics at the University of Bologna, presented his paper on how being corrected by others affects one’s willingness to collaborate with them in future work, as well as gender differences in these responses. Takahashi conducts a quasi-experimental design in which roughly 3000 participants individually and collectively solve a puzzle. The setting allows the researcher to observe individual ability, number of corrections, as well as whether the corrections were good (i.e., a mistake was corrected), or bad (i.e., a good move was corrected). The study analyzes how the different factors affect an individual’s likelihood of being selected as a collaborator in a last puzzle-solving stage where both participants win cash earnings based on joint performance. The results show that both genders respond negatively to a correction, but women more so than men. Men are less likely to collaborate with a person who has corrected their mistake, particularly men with high ability. The gender of the corrector is found not to matter.

Domestic violence (DV) is another gender aspect of well-being that has become particularly concerning during the pandemic. For many victims, lockdowns and curfews have meant more exposure to their perpetrator. Mobility restrictions have also implied more social isolation from family members and friends as well as increased economic distress, two other factors known to exacerbate DV. In a preliminary study presented by Damian Clarke, associate professor at the University of Chile, he and co-authors address the relationship between DV and quarantines in Chile. They use longitudinal data on police DV hotline calls and use of women’s shelters to measure DV incidence, criminal complaints of DV to police to measure reporting, and mobile phone data to measure mobility. Exploiting municipal variation in the timing of lockdown entry and exit, the study shows that lockdowns lead to more DV incidence and less reporting. DV shelter use increased on average by 11% with entry and reversed with exit. DV calls to the police hotline increased by 86% and persists after lockdown exit. DV crime reports decrease by 5% and increases by 10% with exit. Moreover, the authors document that lockdowns activate both DV mechanisms – increased economic distress and decreased mobility. In municipalities where lockdowns had a stronger impact on unemployment and mobility, they also find larger changes in DV.

Expectations About the Future and Parenthood

Two other studies presented at the workshop discussed the relationship between future expectations and well-being. Claudius Garten, researcher at the Technical University of Dortmund, presented findings on the role of homeownership. Garten and co-authors utilize individual-level survey data from 2007 covering 14 European countries. It contains information on homeownership status and wellbeing measures expressed as respondents’ expectations about future living standards five years from today. They find that expectations about future living standards are higher among homeowners relative to renters and strongly associated with the value of housing assets, suggesting that material security through housing ownership works as a channel for future wellbeing. Garten further argued that since most countries included in the sample have experienced rising house property prices and increased rents since 2007, the divergence between renters and owners is likely to be even more significant today, especially in urban areas.

The second presentation that discussed expectations about well-being in later life was by Alina Schmitz, researcher at the Technical University of Dortmund. Unlike housing, which is seen as a form of material security, Schmitz’s study focuses on the role of health infrastructure quality. Availability of care services may be seen as a safety net in case of illness and care dependency and should thus have a positive effect on wellbeing. The study performs a multilevel analysis on the individual, regional and, country level using micro-survey data on individuals’ life satisfaction and macro-data on the availability of long-term care beds, covering 96 regions from six European countries in 2015. The results show that the quality of care infrastructure is significantly related to the wellbeing of those aged above 50. Moreover, care infrastructure is particularly important for the wellbeing of those with health limitations (i.e. those who require that infrastructure either now or in the future).

Parenthood is another factor that is commonly thought of as a source of happiness. Contrary to this idea, European populations are aging rapidly and the young today have fewer children than the generations before them. The reason why people choose to have few children could be several – e.g. high opportunity costs and/or low benefits of having a large family. Is the fertility rate we see in the developed world today a result of the well-being-maximizing decisions of individuals? This is the main question asked in the paper presented by Barbara Pertold-Gebicka, assistant professor at the Institute of Economic Studies at Charles University. Her study utilizes European survey data to investigate the effect of having an additional unplanned child in five developed countries. To measure the effect of an additional unplanned child and deal with the fact that happy individuals tend to have more children, Pertold-Gebicka and co-author compare people who had twin births in their second pregnancy with parents of two children. Apart from life satisfaction, the most common wellbeing measure, the authors construct a second measure of wellbeing denoted as the happiness index – normalized value summarizing five questions about feelings over the last 5 months, interpreted as the relative frequency of positive feelings. They find no significant effect of having a third child on the well-being of parents. However, when separately looking at groups divided by age of children, they find that the effect of having an additional child on well-being is negative for fathers of younger children and positive for those of teenagers. For the parents of younger children, they show that the negative effect of having a third child is likely driven by increased feelings of nervousness and problems relating to accommodation.

Measuring Inequality and Social Deprivation

Some aspects of wellbeing such as feelings of unfairness or social connections can be quite ambiguous to study as they depend on context and are hard to quantify.

Nicolai Suppa, researcher at the Centre for Demographic Studies at the UAB, presented his research aimed to improve the measurement of deprivation in social participation (DSP) and complementing previous work with an additional outcome variable measuring a different dimension of deprivation. The study uses German survey data to measure how often common social activities are performed and then uses an intersectional approach (similar to the “Alkire-Foster method”) to assign individuals as deprived based on if and how often they practice these activities. The findings show that while the DSP measure correlates positively both with income poverty and material deprivation measures, it identifies a different sample of individuals. Being deprived in terms of social participation is associated with a significant loss of life satisfaction, a magnitude comparable to the loss of being unemployed.

Ingrid Bleynat, researcher at Kings College London, also discussed how to improve measurement but presented a study focusing on a different dimension of well-being, inequality. While quantitative approaches may give little account of the detailed mechanisms of inequality and its multidimensionality, qualitative studies often focus on a subset of the population which make results difficult to generalize. Bleynat and co-authors suggest a mixed approach, combining quantitative and qualitative assessments of inequality. They utilize neighborhood-level data on average household income in Mexico City to randomly select five households in each decile of the income distribution and conduct semi-structured interviews in these households to better understand the nuances of inequality. Based on these interviews they construct two qualitative measures. The first is called inequality of lived experiences and measures qualitative experiences in work, education, and health services across the income distribution. The second is called lived experiences of inequality, and measures feelings of stigma, discrimination, and social hierarchy across gender, ethnicity and location. The quantitative data confirms that Mexico City is highly unequal across the income distribution in terms of not only income but also social factors such as housing, health and food security. The results concerning the qualitative measures, such as inequalities in lived experiences or lived experiences of inequality confirm the existing understanding – e.g., that households belonging to the lower deciles are more likely to be mistreated in the public health sector, have a hostile school environment, and worse working conditions, or that women across the income distribution bear most of the childcare responsibilities, – but provide nuanced details on the interaction between material inequality and the reported experiences.

Conclusion

There is no doubt that the impact of Covid-19 on our well-being has been many-sided, and the presentations of the workshop have clearly demonstrated the broad spectrum of related problems and concerns, as well as their variation across institutional, social, political, economic, and cultural contexts.

Although we are well underway, further research and comprehensive data collection on how people have coped with and responded to the pandemic is needed to design sensible recovery policies and incentivize governments to implement them.

On behalf of the Stockholm Institute of Transition Economics, we would like to thank the experts who shared their insightful research and participated in “Dimensions of Well-being“.

List of Participants

Part 1 | Online Workshop on Dimensions of Well-being

Part 2 | Online Workshop on Dimensions of Well-being

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Vaccination Progress and the Opening Up of Economies

20210622 Reopening Soon Webinar Image 01

In this brief, we report on the FREE network webinar on the state of vaccinations and the challenges ahead for opening up economies while containing the pandemic, held on June 22, 2021. The current state of the pandemic in each respective country was presented, suggesting that infection rates have gone down quite substantially recently in all countries of the network, except in Russia which is currently facing a surge in infections driven by the delta-version of the virus. Vaccination progress is very uneven, limited by lacking access to vaccines (primarily Ukraine and Georgia) and vaccine scepticism among the population (primarily in Russia and Belarus but for certain groups also in Latvia, Poland and to some extent Sweden). This also creates challenges for governments eager to open their societies to benefit their economies and ease the social consequences of the restrictions on mobility and social gatherings. Finally, the medium to long term consequences for labour markets reveal challenges but also potential opportunities through wider availability of workfrom-home policies. 

Background

In many countries in Europe, citizens and governments are starting to see an end to the most intense impact of the Covid-19 pandemic on their societies. Infection and death rates are coming down and governments are starting to put in place policies for a gradual opening up of societies, as reflected in the Covid-19 stringency index developed by Oxford University. These developments are partially seasonal, but also largely a function of the progress of vaccination programs reaching an increasing share of the adult population. These developments, though, are taking place to different degrees and at different pace across countries.  This is very evident at a global level, but also within Europe and among the countries represented in the FREE network. This has implications for the development within Europe as a whole, but also for the persistent inequalities we see across countries.   

Short overview of the current situation

The current epidemiological situation in Latvia, Sweden, Ukraine, and Georgia looks pretty similar in terms of Covid-19 cases and deaths but when it comes to the vaccination status there is substantial variation.

Latvia experienced a somewhat weaker third wave in the spring of 2021 after being hit badly in the second wave during the fall and winter of 2020 (see Figure 1). The Latvian government started vaccinating at the beginning of 2021, and by early June, 26% of the Latvian population had been fully vaccinated.

Sweden, that chose a somewhat controversial strategy to the pandemic built on individual responsibility, had reached almost 15 thousand Covid-19 deaths by the end of June of 2021, the second highest among the FREE network member countries relative to population size. The spread of the pandemic has slowed down substantially, though, during the early summer, and the percentage of fully vaccinated is about to reach 30% of the population.

Figure 1. Cumulative Covid-19 deaths 

Source: Aggregated data sources from the COVID-19 Data Repository by the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University, compiled by Our World in Data.

Following a severe second wave, the number of infected in Ukraine started to go down in the winter of 2020, with the total deaths settling at about 27 thousand in the month of February. Then the third wave hit in the spring, but the number of new daily cases has decreased again and is currently three times lower than at the beginning of the lastwave. However, a large part of the reduction is likely not thanks to successful epidemiological policies but rather due to low detection rates and seasonal variation

In June 2021, Georgia faces a similar situation as Ukraine and Latvia, with the number of cumulative Covid-19 deaths per million inhabitants reaching around 1300 (in total 2500 people) following a rather detrimental spring 2021 wave. At the moment, both Georgia and Ukraine have very low vaccination coverage relative to other countries in the region(see Figure 5).

In contrast to the above countries, Russia started vaccinating early. Unfortunately, the country is now experiencing an increase in the number of cases (as can be seen in Figure 2), contrary to most other countries in the region. This negative development is likely due to the fact that the new Covid-19 delta variant is spreading in the country, particularly in Moscow and St. Petersburg. Despite the early start to vaccinations, though, the total number of vaccinated people remains low, only reaching 10.5% of the population.

Figure 2. New Covid-19 cases

Source: Aggregated data sources from the COVID-19 Data Repository by the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University, compiled by Our World in Data.

In some ways similar to Sweden, the government of Belarus did not impose any formal restrictions on individuals’ mobility. According to the official statistics, in the month of June, the rise in the cumulative number of covid-19 deaths and new daily infections has declined rapidly and reached about 400 deceased and 800 infections per one million inhabitants, respectively. Vaccination goes slowly, and by now, around 8% of the population has gotten the first dose and 5% have received the second.

There were two major waves in Poland during the autumn 2020 and spring 2021. In the latter period, the country experienced a vast number of deaths.  As can be seen in Figure 3, the excess mortality P-score – the percentage difference between the weekly number of deaths in 2020-2021 and the average number of deaths over the years 2015-2019 – peaked in November 2020, reaching approximately 115%. The excess deaths numbers in Poland were also the highest among the FREE Network countries in the Spring of 2021, culminating at about 70% higher compared to the baseline. By mid-June, the number of deaths and cases have steeply declined and 36% of the country’s population is fully vaccinated.

Figure 3. Excess deaths

Turning to the economy, after a devastating year, almost all countries are expected to bounce back by the end of 2021 according to the IMF (see Figure 4). Much of these predictions build on the expectations that governments across the region will lift Covid-19 restrictions. These forecasts may not be unrealistic for the countries where vaccinations have come relatively far and restrictions have started to ease. However, for countries where vaccination rates remain low and new variations of the virus is spreading, the downside risk is still very present, and forecasts contain much uncertainty.

 Figure 4. GDP-growth

Vaccination challenges

Since immunization plays such a central role in re-opening the economy and society going back to normal, issues related to vaccinations were an important and recurring topic at the event. The variation in progress and speed is substantial across the countries, though.

Ukraine and Georgia are still facing big challenges with vaccine availability and have fully vaccinated only 1.3% and 2.3% of the population by the end of June, respectively. Vaccination rates have in the recent month started to pick up, but both countries face an uphill battle before reaching levels close to the more successful countries.

Figure 5. Percent fully vaccinated

Other countries a bit further ahead in the vaccine race are still facing difficulties in increasing the vaccination coverage, though not so much due to lack of availability but instead because of vaccine skepticism. In Belarus, a country that initially had bottleneck issues similar to Ukraine and Georgia, all citizens have the opportunity to get vaccinated. However, Lev Lvovskiy, Senior Research Fellow at BEROC in Belarus, argued that vaccination rates are still low largely because many Belarusians feel reluctant towards the vaccine at offer (Sputnik V).

This vaccination scepticism turns out to be a common theme in many countries. According to different survey results presented by the participants at the webinar, the percentage of people willing or planning to get vaccinated is 30% in Belarus and 44% in Russia. In Latvia, this number also varies significantly across different groups as vaccination rates are significantly lower among older age cohorts and in regions with a higher share of Russian-speaking residents, according to Sergejs Gubins, Research Fellow at BICEPS in Latvia.

Webinar participants discussed potential solutions to these issues. First, there seemed to be consensus that offering people the opportunity to choose which vaccine they get will likely be effective in increasing the uptake rate. Second, governments need to improve their communication regarding the benefits of vaccinations to the public. Several countries in the region, such as Poland and Belarus, have had statements made by officials that deviate from one another, potentially harming the government’s credibility with regards to vaccine recommendations. In Belarus, there have even been government sponsored disinformation campaigns against particular vaccines. In Latvia, the main problem is rather the need to reach and convince groups who are generally more reluctant to get vaccinated. Iurii Ganychenko, Senior Researcher at KSE in Ukraine, exemplified how Ukraine has attempted to overcome this problem by launching campaigns specifically designed to persuade certain age cohorts to get vaccinated. Natalya Volchkova, Director of CEFIR at NES in Russia, argued that new, more modern channels of information, such as professional influencers, need to be explored and that the current model of information delivery is not working.

Giorgi Papava, Lead Economist at ISET PI in Georgia, suggested that researchers can contribute to solving vaccine uptake issues by studying incentive mechanisms such as monetary rewards for those taking the vaccine, for instance in the form of lottery tickets. 

Labour markets looking forward

Participants at the webinar also discussed how the pandemic has affected labour markets and whether its consequences will bring about any long-term changes.

Regarding unemployment statistics, Michal Myck, the Director of CenEA in Poland, made the important point that some of the relatively low unemployment numbers that we have seen in the region during this pandemic are misleading. This is because the traditional definition of being unemployed implies that an individual is actively searching for work, and lockdowns and other mobility restrictions have limited this possibility. Official data on unemployment thus underestimates the drop in employment that has happened, as those losing their jobs in many cases have left the labour market altogether. We thus need to see how labor markets will develop in the next couple of months as economies open up to give a more precise verdict.

Jesper Roine, Professor at SITE in Sweden, stressed that unemployment will be the biggest challenge for Sweden since its economy depends on high labor force participation and high employment rates. He explained that the pandemic and economic crisis has disproportionately affected the labor market status of certain groups. Foreign-born and young people, two groups with relatively high unemployment rates already prior to the pandemic, have become unemployed to an even greater extent. Many are worried that these groups will face issues with re-entering the labour market as in particular long-term unemployment has increased. At the same time, there have been more positive discussions about structural changes to the labour market following the pandemic. Particularly how more employers will allow for distance work, a step already confirmed by several large Swedish firms for instance.

In Russia, a country with a labour market that allowed for very little distance work before the pandemic, similar discussions are now taking place. Natalya Volchkova reported that, in Russia, the number of vacancies which assumed distance-work increased by 10% each month starting from last year, according to one of Russia’s leading job-search platforms HeadHunter. These developments could be particularly beneficial for the regional development in Russia, as firms in more remote regions can hire workers living in other parts of the country.

Concluding Remarks

It has been over a year since the Covid-19 virus was declared a pandemic by the World Health Organization. This webinar highlighted that, though vaccination campaigns in principle have been rolled out across the region, their reach varies greatly, and countries are facing different challenges of re-opening and recovering from the pandemic recession. Ukraine and Georgia have gotten a very slow start to their vaccination effort due to a combination of lack of access to vaccines and vaccine skepticism. Countries like Belarus and Latvia have had better access to vaccines but are suffering from widespread vaccine skepticism, in particular in some segments of the population and to certain vaccines. Russia, which is also dealing with a broad reluctance towards vaccines, is on top of that dealing with a surge in infections caused by the delta-version of the virus.

IMF Economic Outlook suggests that most economies in the region are expected to bounce back in their GDP growth in 2021. While this positive prognosis is encouraging, the webinar reminded us that there is a great deal of uncertainty remaining not only from an epidemiological perspective but also in terms of the medium to long-term economic consequences of the pandemic.

Participants

  • Iurii Ganychenko, Senior Researcher at Kyiv School of Economics (KSE/Ukraine)
  • Sergejs Gubins, Research Fellow at the Baltic International Centre for Economic Policy Studies (BICEPS/ Latvia)
  • Natalya Volchkova, Director of the Centre for Economic and Financial Research at New Economic School (CEFIR at NES/ Russia)
  • Giorgi Papava, Lead Economist at the ISET Policy Institute (ISET PI/ Georgia)
  • Lev Lvovskiy, Senior Research Fellow at the Belarusian Economic Research and Outreach Center (BEROC/ Belarus)
  • Jesper Roine, Professor at the Stockholm Institute of Transition Economics (SITE / Sweden)
  • Michal Myck, Director of the Centre for Economic Analysis (CenEA / Poland)
  • Anders Olofsgård, Deputy Director of SITE and Associate Professor at the Stockholm School of Economics (SITE / Sweden)

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Did the Government Help Belarusian SMEs to Survive in 2020?

Enterprises During Pandemic representing Belarus

Capitalizing on the dataset obtained from five waves of the Covideconomy Project business survey, we explore how pandemic-related shocks and state economic policy responses influenced the performance of Belarusian small and medium enterprises (SMEs) in 2020. We find that Belarusian SMEs were left on their own with the COVID-related economic challenges, and only a small portion of enterprises could benefit from state support measures. Only two sectors (Manufacturing and Construction) derived advantages from soft loans provided to state-owned enterprises. The implementation of new, pandemic-adjusted business models did not result in an increase of revenues of Belarusian SMEs, at least not in the short run.

Small and Medium Enterprises During the Pandemic

According to OECD estimates (2020), the small and medium-sized enterprise (SME) sector has been more affected by the COVID-19 pandemic compared to large enterprises. Besides being highly concentrated in the most affected sectors, the main reasons for SMEs experiencing stronger COVID-related shocks are a lower level of cash cushion and limited access to external funds (Goodhart et al., 2021). Next, the stock of supplies and materials, as well as the range of suppliers, are usually lower for SMEs (WTO, 2020). This makes any price changes or abruptions more detrimental for them in comparison to large companies. Lastly, the availability of digital technologies and skills needed to implement new business formats appeared as an additional constraint for the SME sector during the pandemic. Indeed, per the World Bank’s business surveys, the most frequently mentioned effects of COVID-19 on SMEs in Central and Eastern European countries were a drop in sales, liquidity problems, limited access to finance, and breakdowns in supply. In this context, only 35% of SMEs in the region were able to adapt quickly to new conditions by introducing new business models such as online sales, delivery services, and remote work. At the same time, many SMEs in the region laid off employees, reduced wages, or initiated furloughs as alternatives to closing the business altogether.

In this regard, the SME support measures became an extremely important task for national governments to conduce to faster economic recovery and job creation. As a result, a wide range of monetary and non-monetary measures was implemented in various countries to support SMEs.

Internationally, direct support was provided in the form of wage subsidies, cash grants and transfers, tax holidays, reductions, or deferrals that could prevent unemployment growth. In addition, liquidity problems of SMEs were addressed by introducing rental fee deferral or reduction, repayment holidays as well as providing micro and short-term loans.

In many countries, specific measures were aimed to support the digitalization of SMEs (e.g., in China, France, Latvia, Italy, Slovenia, South Korea) by offering subsidies, financial support, training, and consulting services, developing e-commerce sales channels to respond to pandemic-related challenges (OECD, 2020).

Figure 1 demonstrates shares of SMEs in Central and Eastern European countries that benefitted from state support measures and SMEs’ perceived importance of these measures. Wage subsidies (65.1%) and direct cash transfers and grants (47.1%) appeared as the most commonly used measures, while fiscal exemption and reductions were regarded as the most important and relevant ones.

Concurrently, at the macro level, some governments eased requirements on banks’ emergency funds and reduced base rates to provide more and cheaper financial resources as loans for the enterprise sector.

Figure 1: Scope and importance of SME support measures

Source: World Bank data on Belarus, Russia, Poland, Estonia, Latvia, Lithuania, Georgia, Moldova, Slovakia, Czech Republic, Bulgaria, Romania, Hungary.

In general, the scope and target groups of the support programs depended on financial resources at the disposal of governments, access to capital markets, macroeconomic conditions (public debt, exchange rates, unemployment rates), as well as the structure of the economy.

In this brief, we discuss how the macroeconomic environment and the Belarusian government’s policy reaction to the pandemic affected revenues of Belarusian SMEs in 2020.

The Belarusian Economy in 2020

The official statistics reported outstanding results of the Belarusian economy, despite it being expected to be hit harder than other countries in the region. The COVID-19 pandemic-related shocks were aggravated in Belarus by endemic ones: the early-2020 oil-supply dispute with Russia, the sociopolitical crisis that broke out after the presidential elections in August (Bornukova et al., 2021), and the concomitant sharp devaluation of the Belarusian ruble (22.59% to US dollar in 2020) in March and August. Against this backdrop, the 0.9% decrease in GDP, 4.6% increase in real disposable incomes, and stable unemployment rate (at 4.0%) together look like an economic miracle. Some of the rationales behind these figures include the absence of lockdowns and substantial mobility restrictions throughout the year, as well as easy access to bank loans for state-owned enterprises (SOEs) that faced an export shock. At the same time, ad-hoc sampled population and business surveys documented income reductions of Belarusians and a substantial decrease in business revenues in many sectors (Covideconomy project, 2021). Figure 2 displays the shares of SMEs in different sectors whose revenues dropped by more than 20% in the month before being surveyed.

Figure 2. Share of SMEs with loss of revenue >20%  

Source: Own elaboration based on five ways of business surveys

The Belarusian government was substantially restricted in terms of financial resources as well as fiscal and external loan opportunities to extensively support businesses suffering from the COVID-related economic crisis. According to experts’ estimations, Belarus lags behind other Eurasian Economic Union members (Russia, Armenia, Kazakhstan, Kyrgyzstan) in terms of the estimated share of GDP spent on crisis response measures – 1.5% (Russian Academy of Foreign Trade & Research Institute of VEB, 2020). While the most suffering sectors (trade, transportation, hotels, restaurants, tourism, education, leisure, sport, etc.) could benefit from the deferral of profit, real estate and land taxes, as well as rental fees till the end of 2020, obtaining any type of support appeared bureaucratically challenging and imposed exigent obligations for the future. Overall, the support was perceived as negligible and far below expectations both in terms of financial resources saved by businesses and coverage. Thus, in May-October 2020, about 50 thousand businesses (incl. sole proprietors) received cumulative support for a total amount of $26 Million or $536 per business (National Center of Legal Information of the Republic of Belarus, 2020). According to the Covideconomy project, in May-July, less than 5% of SMEs reported getting support from the state.

What Affected Belarusian SMEs?

Motivated by the specific reaction of the Belarusian government and its very limited support to SMEs, we explore what enterprise- and country-level factors affected SME revenues across industries during the pandemic. In pursuit of this objective, we use data obtained from five waves of the business survey conducted within the Covideconomy project (2020) on 359 SMEs amounting to 947 observations, and perform a regression analysis with a set of ordered logistic models. Particularly, we test whether the (i) self-isolation of population, (ii) currency devaluation, (iii) volume of loans provided to SOEs, and (iv) new business models implemented by Belarusian SMEs impacted their revenues.

These hypotheses are based on the following arguments:

  1. In the absence of restrictive measures and lockdowns, entrepreneurs and citizens made conscious decisions about self-isolation and remote work. To minimize personal contact, many people reduced the number of visits to public places as well as various group activities. Such responsible behavior could hurt business income, primarily in the areas of catering, hotels, entertainment, transport, and consumer services, in which SMEs are widely represented.
  2. The sharp devaluation of the Belarusian ruble is, and has traditionally been, a significant problem for Belarusian businesses. The rise in prices of imported goods and services, inflation, and the fall in household incomes in dollar terms harm domestic demand, leading to a drop in sales in many sectors. The exceptions could be export-oriented enterprises, which mostly use materials and supplies produced in Belarus, as well as enterprises that are suppliers and contractors of exporters.
  3. To minimize the impact of the pandemic-related shocks, the Belarusian government continued its habitual practice of providing soft loans for SOEs to maintain their production volumes and pay wages. Arguably, this could bolster demand for SMEs’ goods and services from the side of SOEs’ employees and prevent a deeper recession. In addition, SMEs that were suppliers and contractors of SOEs could also benefit from this policy measure.
  4. The pandemic significantly accelerated SMEs’ processes of finding and realizing opportunities to develop. This became key in the survival of many businesses. We thus expect that the implementation of new business models could have had a positive impact on revenues of SMEs.

In our models, we use the size of SMEs, location in the capital city, and whether a firm belongs to one of the most suffering sectors (HoReCa, Transportation, Leisure & Sport) as control variables. To capture the effect of factors across different sectors, we use interaction terms between the aforementioned factors and dummies indicating different sectors.

The results of the regression analysis (summarized in a stylized way in Table 1) demonstrate that the impact of the selected factors is not consistent across sectors and that none of the factors appear significant when considering the entire sample of SMEs.

Table 1. Impact on SMEs’ revenues

Source: Own estimates based on 947 observations from 359 SMEs.

Not surprisingly, self-isolation behavior negatively affects only the HoReCa and Leisure & Sports sectors. Currency devaluation does not significantly influence the revenues of SMEs. Only the ICT sector, which is export-oriented and does not depend on imported materials, easily adapted to remote work and increased demand for IT-related services and experienced a positive shock. The state policy that provided soft loans to SOEs helped SMEs in the manufacturing and construction sectors that are, supposedly, contractors and suppliers of SOEs. The implementation of new business models did not result in an increase in the revenues of Belarusian SMEs, at least not in the short run. A possible explanation for this finding could be that firms responded by adopting new business models only if they experienced a very steep fall in revenues.

As for the control variables, we find that larger enterprises better adapted to the crisis and their decrease in sales appear smaller. Interestingly, SMEs located in the capital city –  Minsk – suffered more from the crisis in 2020, likely, due to a higher concentration of SMEs in the most affected sectors and a quicker reaction of citizens to economic and political shocks.

Conclusion

Based on our analysis, we can deduce that Belarusian SMEs were left on their own with the COVID-related economic challenges. Only a small share of enterprises could benefit from the state support measures and only two sectors (Manufacturing and Construction) derived advantages from soft loans provided to SOEs.

At the same time, the absence of lockdowns and other restrictions – the laissez-faire approach (Bornukova et al., 2021) – propped up most of the sectors except those that suffered from voluntary self-isolation of customers (HoReCa, Leisure, Sport, Beauty).

The ongoing crisis substantially changes the economic landscape, management practices, and business models of SMEs. The most flexible, competitive, and proactive businesses have been capable of identifying and exploiting the emerged opportunities. From this point of view, Belarusian businesses and entrepreneurs have outstanding experience in surviving and developing during recurrent crises (Marozau et al., 2020). This must be an important pre-condition for the future economic recovery of Belarus.

References

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Inequality in the Pandemic: Evidence from Sweden

Condominium houses near the water representing inequality during the covid19 pandemic

Most reports on the labor-market effects of the first wave of COVID-19 have pointed to women, low-skilled workers and other vulnerable groups being more affected. Research on the topic shows a more mixed picture. We contribute to this discussion. Using monthly official unemployment data in Sweden we find that across wage levels, occupations with lower salaries display higher increases in unemployment, and low-wage occupations are also more difficult to do from home. The job loss probability is also higher in sectors with a higher concentration of workers born outside of the EU and those aged below 30. But we find no evidence of a gender unequal impact in Sweden. Overall, our results point to higher effects for low-wage groups but small gender differences overall.

Introduction

The ongoing Covid-19 pandemic has affected the health of millions of people worldwide. But it has also had an enormous impact on economic and living conditions through government policies aimed at containing the spread of the infection. While, at the onset of the pandemic, government officials, mainstream media, and even celebrities labeled COVID-19 “the great equalizer” (Mein, 2020), the reality has proven quite different, with the most vulnerable groups of the population appearing to be the most harmed by both the health and the economic crises (see, for instance, The World Economic Forum, Joseph Stiglitz in this IMF article, and The World Bank). In this brief, we focus on one specific economic impact of the pandemic, namely its effect on unemployment status, and we study the extent to which this impact has been unequal across different groups of the Swedish society. Our analysis uses administrative data and segments the population by wage, gender, age, and foreign-born status.

Covid-19 and Inequality in the Labor Market

An extensive review of the emerging literature on the effect of the pandemic on different kinds of inequality is beyond the scope of this brief. However, a number of studies are especially relevant to put our analysis in context, as they are focused on the unequal labor market impacts of the crisis and study real-time data. Based on these studies, a number of patterns emerge. First, the effect of the pandemic on the increased probability of job loss appears stronger for low-skilled workers, as proxied by education level (see e.g., Adam-Prassl et al., 2020, Gaudecker et al.  2020, Casarico and Lattanzio 2020). Gaudecker et al. (2020) also observe that in the Netherlands the negative education gradient has been mitigated by the government identifying some sectors of the economy as essential since some of these sectors are characterized by a high concentration of low-educated workers. Second, the evidence of unequal gender impacts on the probability of job loss is mixed. While survey information from the UK and the US reveals that labor market outcomes for women have more severely deteriorated during the crisis (Adams-Prassl et al., 2020), there is no evidence of unequal impacts by gender in Germany (Adams-Pras et al., 2020) and Italy (Casarico and Lattanzio, 2020). Other papers confirm that the effect on labor-market outcomes by gender varies across contexts (see, e.g.,  Hupkau and Petrongolo, 2020).

Analysis of Labor Market Data From Sweden

Our analysis of the Swedish labor market provides a valuable contribution to the existing findings for a number of reasons. First, despite rising inequality over the past decades, Sweden is characterized by relatively low income inequality (e.g. OECD, 2019), high participation of women in the labor market, and high level of society inclusiveness (e.g. Gottfries, 2019, OECD 2016) among OECD countries. Second, unlike the majority of countries worldwide, throughout the pandemic, Sweden has not adopted stay-at-home orders that would have separated sectors of the economy between “essential” and “non-essential”. As a result, sectors that were typically shut down in other countries, for instance, the hospitality industry, were not ordered to close during the first wave of the pandemic and have then only faced partial limitations during the second wave. Importantly, schools below the secondary level were never closed. Third, as we will describe in more detail below, the availability of administrative information on unemployment claims on a monthly basis allows studying the “real-time” development of unemployment throughout the pandemic for the universe of employees in the Swedish labor market.

Data

We use data from the registry of unemployed individuals kept by the Swedish Public Employment Service (Arbetsförmedlingen), the government agency responsible for the functioning of the Swedish labor market. The incentives for laid-off individuals to register with the Employment Service are high since the registration is directly connected to the right to claim various (relatively generous) unemployment benefits. As such, the data arguably includes a large share of employees who lost their job over the period studied. Based on the high incentives to register as unemployed, we also assume that the probability to register does not differ the segments of the population that we consider. The data does not include some self-employed who for various reasons choose not to register, but this group is not believed to be significant. Also, furloughed workers do not count as unemployed. This group was significant, especially in the very early stages of the pandemic, but still small relative to all unemployed. As of July 2020, they represented 13% of the total pool of unemployed individuals in Sweden (Swedish Agency for Economic and Regional Growth, 2021).

The population-wide coverage is the main advantage of our data vis-à-vis the survey information used in many recent studies of the labor market throughout the pandemic (other studies using administrative data are Casarico and Lattanzi, 2020, studying the Italian labor market, and Forsythe et al., 2020, who analyze the US case).

We consider everyone registered as unemployed/seeking employment each month from January 2019 to July 2020. The data is grouped by 4-digit occupational classification (there are about 440 occupations at this level) and each occupational group is further broken down by sex, age, and foreign-born status (specifically, Sweden born, foreign EU born, and foreign non-EU born.) We then merge this data with information on the average wage by occupational group and gender in 2019, as reported by Medlingsinstitutet and publicly available at Statistics Sweden. This measure, although not being at the individual level, allows us to develop a relatively precise proxy of wages by occupation that we use to rank unemployment by wage deciles.

Evidence

With the data described above, we build the following measure of the change in job-loss probability (JLP) between February and July 2020, adjusted for seasonality:

where u is the number of workers in 4-digit occupational sector who registered as unemployed in a month over the average number of employed in the same sector in 2017 and 2018 (data available at Statistics Sweden). Put it simply, ΔJLP is a sector-level indicator of the change in job loss probability due to the pandemic; it measures the change in chances of job loss between February and July 2020, i.e. between five months after the start of the pandemic and the month before its onset, as compared to the equivalent change the year before. We thus account for seasonal factors by differencing out the job loss probability during the same months of 2019, when the pandemic was neither occurring nor anticipated. Below we use ΔJLP to show differences in the impact of the pandemic on the chances of job loss for different groups of the Swedish society.

Job loss probability by wage deciles. We leverage information on sector-level average wages and the number of employees to partition occupational sectors into (approximate) wage deciles. The purpose of such a partition is to rank sectors as being typically “low-” or “high-” wage within the Swedish context. As we document in Figure 1, the pandemic has increased the probability of job loss across all sectors of the economy; however, this increase in percentage points is higher the lower is the average sector wage, with the category of least-paid workers being the most likely to lose their job. This category includes occupations such as home-based personal care and related workers, cleaners and helpers in offices, hotels and other establishments, or restaurant and kitchen helpers. Considering that the pre-pandemic probability of becoming unemployed was already largest for this group (19.7% compared to the average 6% in 2019), the existing inequality in the labor market has been exacerbated by the Covid-19 crisis. In our regression analysis that is available by request, we also find that accounting for an index of the share of tasks that can be performed from home, defined at 2-digit occupational level, does not explain away the negative and significant relationship between wages and job loss probability. Although, we confirm previous evidence that the probability of losing jobs is lower among occupations that can be performed from home. The substantial contraction in economic activity in some sectors of the economy seems to be the driver of the unequal distribution of job losses.

 Figure 1. Change in job loss probability by wage decile between February and July

Source: Author’s own calculation, for data sources see Data Section.

Job loss probability by gender. Figure 1 also documents that, even though the change in job loss probability is higher in sectors dominated by women, the likelihood of men losing jobs has increased more in these sectors. As a result, in the regression analysis we find that there is no significant association between the share of women in a sector and the sector-level change in job loss probability.

Job loss probability by foreign status and age. We find that workers who are born outside of EU countries are significantly more likely to transition into unemployment during the pandemic (see Figure 2). The difference is striking. Based on our indicator, considering male workers the pandemic has raised the probability of job loss by roughly 7 p.p. more for non-EU citizens as compared to non-Swedish EU citizens, and by 9 p.p. more compared to Swedish citizens. These differences are only slightly smaller for women. Another group particularly affected is that of workers in the age group below 30 (result available upon request). Such patterns are due to foreign-born and younger workers being more concentrated in those low-wage sectors that also appear, based on our analysis, to be more impacted by the pandemic in terms of job loss probability

Figure 2. Change in job loss probability by foreign status between February and July 2020

Source: Author’s own calculation, for data sources see Data section

Conclusion

Our analysis of administrative monthly data on the number of workers who register as unemployed in Sweden confirms previous evidence that the Covid-19 crisis has not been “the great equalizer”. While the pandemic has increased the probability of losing jobs across all sectors, the most affected in Sweden are those workers in occupations where the lowest wages were paid before the pandemic. Considering other demographic characteristics, vulnerable groups that were most impacted by the crisis are workers born outside of the EU and workers aged below 30. However, we do not find evidence of a gender-unequal impact of the pandemic in terms of the probability of job loss. There may of course be many other aspects to the issue along gender lines. For example, on one hand, there might be gender-unequal effects that we cannot observe in our data, for instance in the number of hours worked, temporary unemployment, and level of stress due to increased childcare responsibility. On the other hand, since schools in Sweden stayed open throughout the pandemic, the concerns related to increased childcare responsibility, which have led to identifying mothers as most vulnerable in other countries, do not necessarily apply to the Swedish context.

Sweden has adopted a number of measures to shield workers from the worst effects of the pandemic. As the country plans the recovery, special attention should be devoted to the opportunities for re-employment for the most vulnerable groups. Absent such focus, the economy emerging from the crisis might be less inclusive and equal than it has been before the pandemic, with important consequences for many societal outcomes that are generally linked to labor market inclusiveness.

References

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Laissez-faire Covid-19: Economic Consequences in Belarus

20210301 Addressing the COVID-19 Pandemic FREE Network Policy Brief Image 04

Despite its traditional paternalistic role, the Belarusian government chose minimal reaction to the Covid-19 pandemic. No meaningful economic or social measures were taken in response to the pandemic. We explore a unique dataset to document how major Covid-related shocks affected the earnings of Belarusians in 2020. We utilize the differential timing and sectoral effects of the shocks to identify the impact of Covid-19 on individual socioeconomic outcomes. Not surprisingly, we find that Covid-related shocks increase the probability of an income reduction. This effect is most pronounced for those employed in the private sector. In the absence of a social security net, vulnerable groups had to cope with the economic consequences of the pandemic on their own.

Introduction

Belarus had its first official case of Covid-19 registered on February 27 and its first death on March 31. At first, the increase in newly registered cases was slower than in most other countries, but at the beginning of April Belarus started to catch up. The peak of the first wave was recorded on May 18 with 943 new daily cases. According to the official statistics, the second wave started in September 2020 and was much more severe than the first one, reaching 1,890 new daily cases by the end of December.

Belarusian authorities did not undertake any substantial interventions, such as lockdowns, to fight the spread of the pandemic.  Nevertheless, there were several other key mechanisms through which Covid-19 affected the Belarusian economy. The population’s reaction to the risks of contamination led to a substantial fall in mobility that resulted in decreased sales in retail and services requiring physical interaction. For example, sales in the restaurant industry decreased by 20% in 2020. Lockdowns in major international trade partners such as Russia have led to a decrease in demand for Belarusian exports of goods and transportation services. In the face of these economic challenges, the government focused its attention on supporting full employment and production in state-owned enterprises while ignoring the rest of the economy.

In this brief, we present evidence of the economic effects of Covid-19 in Belarus. We employ a unique dataset on socioeconomic outcomes collected by BEROC to study how individuals are affected by Covid-related shocks in mobility and exports. In order to isolate the effects of these shocks on the well-being of Belarusians, we exploit their timing and sectoral differences.

Measuring Covid-related Shocks

Figure 1 depicts changes in the Yandex self-isolation index which measures the use of Yandex services, including Yandex traffic monitoring and customer mobility compared to the average pre-pandemic day (Yandex DataLens, 2021). Individual everyday mobility started to decline in mid-March, and as the first wave of the pandemic gained momentum, mobility reached its lowest point at the end of April. It started to decline again in November-December 2020 following the second wave.

Figure 1. Yandex self-isolation index in Belarus, 2020

Source: Yandex. The average value during 24 Feb-8 March 2020 set to 100. Seven-day rolling average.

Belarus is a small and open economy with Russia as its main trading partner. The lockdown in Russia that lasted from the end of March until mid-May along with the spring lockdowns in Europe caused a major contraction in external demand for Belarusian goods. Figure 2 shows total physical exports and non-energy physical exports in 2020. The largest difference between total and non-energy exports can be observed in January, February, and March during which Russia and Belarus had an oil-supply dispute. To focus on the effects of the pandemic we use non-energy physical exports to approximate Covid-related exogenous shocks to the economy.

Figure 2. Physical export indices, Belarus

Source: Belstat. December 2019=100.

Income Dynamics

To measure the impact of Covid-19 on Belarusian society, BEROC, in cooperation with the marketing and opinion research company SATIO, conducted a series of online surveys representative of the urban population of Belarus (Covidonomics, 2021). The five waves of the 2020 survey were carried out on April 17-22, May 8-11, June 8-15, September 11-16, and November 25-30.

Respondents were asked about recent changes to their income, and also to specify the reasons for income reduction (if this was the case), including depreciation of the ruble, salary cut, furlough, etc.  Figure 3 depicts the percentage of individuals who reported an income reduction in the previous month for reasons other than currency depreciation by sector of employment. The income reductions peaked in April-June, with the situation relatively stabilizing by September.

Figure 3. Income dynamics by sector

Percentage of respondents reporting income reductions in the previous month for reasons other than currency depreciation, Source: BEROC/SATIO data

The fact that the share of respondents reporting termination peaked at 2.9% in May indicates that firms did not use employment reduction to adapt to the pandemic environment. A big share of respondents employed in the service sector reported domestic demand contraction (fewer orders/clients) as a key factor for their income reduction. The industries that took the hardest hit were hospitality-retail and transportation. In early spring, manufacturing appeared to be one of the most affected industries. However, as exports started to recover in June, the share of manufacturing workers that reported an income reduction decreased significantly, becoming one of the lowest across industries.

Identifying the Effects of Covid-19 Shocks

In this section, we estimate the probability of facing a reduction in individual income as well as the likelihood of being furloughed due to the Covid-19 pandemic.

In 2020, the Belarusian economy suffered due to the oil-supply dispute with Russia, the Covid-19 pandemic, and the national political crisis. To isolate the effects of Covid-19 from those driven by the oil dispute and the political crisis, we add interactions between Covid-related shocks and dummies indicating industries affected by those shocks. This implies three interactions with different binary indicators: exports and manufacturing, exports and transportation, and mobility and hospitality/retail.

To estimate these effects, we use a fixed-effects probit regression controlling for sector of employment, education, age, and gender.

Table 1. Probability of income reduction and furlough

Source: Own estimates from BEROC/Satio data. Controls include age, sector of employment, and education level.

Table 1 shows that individuals employed in the hospitality and retail industry face higher risks of an income reduction due to decreased mobility caused by self-isolation behavior. A 10-percentage-point increase in the self-isolation index is associated with a 1.3 percentage point increase in the probability of income reduction for those employed in the retail and hospitality industry. The interaction term between exports and the manufacturing dummy also appears to be statistically significant for various specifications. A 10-percentage-point decline in physical volumes of exports is associated with a 8.6 percentage point increase in the probability of income reduction for manufacturing workers.

Notably, the private sector employment coefficient shows strong statistical significance which highlights the choice of the authorities to support SOEs, with little to no support for the private sector. Being employed in the private sector increases the probability of facing an income reduction by 7.9 percentage points.

The Gender Dimension

Despite concerns that women experience larger economic losses due to consequences of the pandemic (Dang and Nguyen, 2021; Alon et al., 2020b), we do not find a statistically significant effect of gender in our sample.  In particular, our results offer no evidence of women being more likely to experience an income reduction during the pandemic, similar to findings in Germany (Adams-Prassl et al. 2020c).

While job losses were uncommon during the Covid-19 crisis in Belarus, being furloughed was one of the most common reasons for an income reduction (11.3% of respondents reported being furloughed in May). We also investigate the separate channels through which individuals lose income due to the Covid-related shocks. Notably, the only channel of income reduction that is more prevalent among women than men is through furlough. This finding is consistent with Adams-Prasslet al. (2020a) who argue that this discrepancy can be explained by gender differences in childcare responsibilities.

Conclusion

Belarus is close to unique in having almost no government response to the Covid-19 pandemic. Despite the absence of lockdowns and other restrictions, the Belarusian economy has experienced several Covid-associated shocks. Due to the economy’s openness to trade, it was seriously affected by export contractions. Belarusians have voluntarily reduced their mobility to minimize health risks which has affected the hospitality and retail industry.

We utilize the differential timing and sectoral impact of Covid-related shocks to estimate the pandemic’s effect on the socioeconomic outcomes of individuals. By using a unique dataset, we find evidence that the pandemic increased the likelihood of income reductions for Belarusians, mainly due to the effects of decreased mobility and fall in exports. We also find that those employed in the private sector were more likely to suffer from negative shocks, reflecting the policy choice of the Belarusian government to only provide economic support to the state sector. Finally, we show that, while women are as likely as men to see their income reduced, they are significantly more likely to be furloughed.

Many Belarusians saw their well-being deteriorating as a result of the Covid-19 pandemic. In the absence of unemployment benefits and other social protection mechanisms (Umapathi, 2020), those economically affected had to bear the cost of the shocks on their own.

References

  • Adams-Prassl, A., Boneva, T., Golin, M., and Rauh, C. (2020a). Furloughing. Fiscal Studies, 41(3):591–622.
  • Adams-Prassl, A., Boneva, T., Golin, M., and Rauh, C. (2020b).  Inequality in the impact of the coronavirus shock:  Evidence from real time surveys. Journal of Public Economics, 189:104245.
  • Covidonomics project (2020). BEROC and Satio. http://covideconomy.by/
  • Dang, H.-A. H. and Nguyen, C. V. (2021). Gender inequality during the Covid-19 pandemic: Income, expenditure, savings, and job loss. World Development, 140:105296.
  • Umapathi, N. (2020). Social protection system in Belarus:  perspective. Bankovskiy Vestnik, (3):75–80.  (in Russian).
  • Yandex (2021) Yandex DataLens, https://datalens.yandex.ru/

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Addressing the COVID-19 Pandemic: Vaccination Efforts in FREE Network Countries

Preparing Covid Vaccine on Pink Surface representing COVID-19 vaccination

There are great expectations that vaccinations will enable a return to normality from Covid-19. However, there is massive variation in vaccination efforts, vaccine access, and attitudes to vaccination in the population across countries. This policy brief compares the situation in a number of countries in Eastern Europe, the Baltics, the Caucasus region, and Sweden. The brief is based on the insights shared at a recent webinar “Addressing the COVID-19 pandemic: Vaccination efforts in FREE Network countries” organized by the Stockholm Institute of Transition Economics.

Introduction

As of February 16, 2021, the total number of confirmed COVID-19 deaths across the globe has reached 2.45 million according to Our World in Data (2021).  Rapid implementation of vaccination programs that extend to major parts of the population is of paramount importance, not only from a global health perspective, but also in terms of economic, political, and social implications.

Eastern Europe is no exception. Although many countries in the region had a relatively low level of infections during the first wave of the COVID-19 pandemic in the spring of 2020, all have by now been severely affected. Vaccination plays a key role for these economies to bounce back, especially as many of them depend on tourism, trade, and other sectors that have been particularly hurt by social distancing restrictions.

 Figure 1. Cumulative confirmed COVID-19 cases (top panel) and deaths per million (bottom panel) in the FREE Network region

Source: John Hopkins University CSSE COVID-19 visualizations: Ourworldindata.org/coronavirus

Against this background, the Stockholm Institute of Transition Economics invited representatives of the FREE Network countries to discuss the current vaccination efforts happening in Eastern Europe, the Baltics, and the Caucasus (the represented countries were Belarus, Georgia, Latvia, Poland, Russia, Sweden, and Ukraine). This brief summarizes the main points raised in this event.

Vaccination Status

In Latvia, Poland, and Sweden, the second wave of infections started to pick up in November 2020 and peaked according to most COVID-19 impact measures in early 2021. As all three countries are members of the EU and take part in its coordinated efforts, they have all received vaccines from the same suppliers (i.e. Astra/Zeneca, Moderna, and Pfizer/BioNTech).

Latvia had problems early on with getting the vaccination process off the ground. The health minister was blamed for the slow start since he declined orders from Pfizer/BioNTech in the early stages, and was forced to resign. As of February 16, two doses per 100 people have been distributed primarily to medical staff, social care workers, and key-state officials.

Figure 2. Cumulative COVID-19 vaccination doses per 100 people

Source: Our world in data, last updated February 24th, 2021. This is counted as a single dose, and may not equal the total number of people vaccinated. Visualizations: Ourworldindata.org/coronavirus

With the first phase starting in late December, Sweden has by February 16th, 2021, fully vaccinated 1,05% of the population while experiencing serious problems with delivery and implementation. As planning and delivery of vaccines are centralized while the implementation is decided regionally, there have been some unclarities regarding who stands accountable for issues that emerge. Guidelines, issued by the Public Health Agency of Sweden, for how to prioritize different groups have been changed a couple of times. Currently, the (non-binding) recommendation is to prioritize vaccinating people living in elderly care homes, as well as personnel working with this group, followed by those above 65 years of age, health care workers, and other risk groups.

Looking at regional statistics there are significant differences in vaccinating people across regions with an average of 70% usage rate of delivered vaccines, and with lows at 40-60%, see figure 3. Reasons for this remain unclear.

Figure 3. Distributed relative to delivered vaccines across counties (län) in Sweden.

Source: Authors’ calculations based on data collected by the Public Health Agency of Sweden. Last updated February 14th, 2021.

Poland has so far been somewhat more efficient than Sweden in its vaccination efforts. Despite turbulent political events over the last couple of months, it has managed to distribute 5.7 doses per 100 people. The country has just finished the first phase of the national vaccination plan, which focused on vaccinating healthcare personnel, and has now entered the second phase with a shifted focus towards elderly care homes, people above 60 years of age, military, and teachers.

Among the countries that are not members of the EU, and thus, not taking part in its coordinated vaccination efforts, the vaccination statuses are more diverse.

Russia was fast in developing and approving the Sputnik V vaccine. The country started vaccinating in early December, although only people in the age of 18-60 in prioritized occupations such as health care workers, people living and working in nursing homes, teachers, and military. At the start of 2021, the program extended to people above 60 and, on January 16, all adults were given the possibility to register themselves and get vaccinated within one week. There are no precise data at the moment, but the fraction of the population vaccinated is likely to be higher than 1%.

Others in the region have faced greater challenges in signing contracts with vaccine suppliers. Georgia and Ukraine are still waiting to secure deliveries and have not yet started to vaccinate. Being outside the EU agreements and with public and political mistrust towards Sputnik V and Russia alternatives are being explored. Georgia has ordered vaccines through the COVAX platform (co-led by Gavi, the Coalition for Epidemic Preparedness Innovations (CEPI) and WHO) but there are concerns about potential delays in deliveries. In terms of prioritizing groups once vaccinations can start, both Ukraine and Georgia have set similar priorities as other countries, with extra focus on health-care and essential workers, age-related risk groups, and people with chronic illnesses.

While Belarus’ official figures on the death toll have been widely perceived as unrealistic from the beginning, the most accurate and recent data shows an excess deaths rate of about 20% in July. The country has no precise data on vaccinations, but some reports have emerged based on interviews with government officials in the Belarusian media. These suggest that around 20,000 imported doses of Sputnik V have been distributed mainly to medical professionals and an additional 120,000-140,000 doses have been promised by Russia.

Main Challenges

The discussion during the Q&A session at the webinar concerned the economic and political implications of vaccinations in the region.

Pavlo Kovtoniuk, the Head of Health Economics Center at KSE in Ukraine, stressed the importance of a coordinated vaccination effort in Europe with regards to geopolitics. There is a clear EU vs Non-EU divide in the vaccination status across European countries. The limited vaccine availability in Non-EU countries such as Ukraine, Georgia, and Belarus offers opportunities for more influential nations like Russia and China to pressure and affect domestic policy in these countries.

Also highlighting the fact that no one is safe until everybody is safe, Lev Lvovskiy, Senior Research Fellow at BEROC in Minsk, noted that vaccination efforts in Europe are important for recovery in small open economies like Belarus as many of its trade partners currently have imposed temporary import restrictions.

Similar to the political crisis happening alongside the pandemic in Belarus, the challenges we see in Poland – protests against the recent developments regarding abortion rights and attempts by the government to limit free media – have deflated the urgency to vaccinate in terms of its future economic and political implications, according to Michal Myck, director of CenEA in Szczecin.

Looking forward, another major challenge for the region is vaccine skepticism. Not only do many countries have to build proper infrastructure that can administer vaccines at the required scale and pace, but also make sure that people actually show up. In Latvia, Poland, Georgia, Russia, and Ukraine, polls show that less than 50% of the population are ready to vaccinate. Sergejs Gubin, Research Fellow at BICEPS in Riga, highlighted that there can be systematic variation in the willingness to vaccinate within countries as e.g. Russian-speaking natives in Latvia have been found to be less prone to vaccinate on average. Also, most of the skepticism in Georgia has been more directed towards the Chinese and Russian vaccine than towards those approved by the EU, according to Yaroslava Babych who is lead economist at ISET in Tbilisi.

Even though vaccine skepticism is an issue in Russia too, Natalya Volchkova, Director of CEFIR at New Economic School in Moscow, pointed to the positive impact of “bandwagon effects” in vaccination efforts. When one person gets vaccinated, that person can spread more accurate information about the vaccine to their social circle, resulting in fewer and fewer people being skeptical as the share of vaccinated grows. In such a scenario vaccine skepticism can fade away over time, even if initial estimates suggest it is high in the population.

Concluding Remarks

Almost exactly a year has passed since Covid-19 was declared a pandemic. The economic and social consequences have been enormous. Now vaccines – developed faster than expected – promise a way out of the crisis. But major challenges, of different types and magnitudes across the globe, still remain. As the seminar highlighted, there are important differences across transition countries. Some countries (such as Russia) have secured vaccines by developing them, but still face challenges in producing and distributing vaccines. Others have secured deliveries through the joint effort by the EU, but this has also had its costs in terms of a somewhat slower process (compared to some of the countries acting on their own) and sharing within the EU. For some other countries, like Belarus, Ukraine, and Georgia, the vaccination is yet to be started. All in all, the choice and availability of vaccines across the region illustrates how economic and geopolitical questions remain important. Finally, for many of the region countries vaccine skepticism and information as well as disinformation are important determinants in distributing vaccines. Summing up, the combination of these factors once again reminds us that how to best get back from the pandemic is truly a multidisciplinary question.

List of Participants

  • Iurii Ganychenko, Senior researcher at Kyiv School of Economics (KSE/Ukraine)
  • Jesper Roine, Professor at Stockholm School of Economics (SSE) and Deputy Director at the Stockholm Institute of Transition Economics (SITE/ Sweden)
  • Lev Lvovskiy, Senior Research Fellow at the Belarusian Economic Research and Outreach Center (BEROC/ Belarus)
  • Michal Myck, Director of the Centre for Economic Analysis (CenEA/ Poland)
  • Natalya Volchkova, Director of the Centre for Economic and Financial Research  ­New Economic School (CEFIR NES/ Russia)
  • Pavlo Kovtoniuk, Head of Health Economics Center at Kyiv School of Economics (KSE/Ukraine)
  • Sergej Gubin, Research Fellow at the Baltic International Centre for Economic Policy Studies (BICEPS/ Latvia)
  • Yaroslava V. Babych, Lead Economist at ISET Policy Institute (ISET PI/ Georgia)

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Video of the FREE Network webinar “Addressing the Covid-19 Pandemic: Vaccination Efforts in Free Network Countries

Pollution and the COVID-19 Pandemic: Air Quality in Eastern Europe

Factory with chimney smoke representing air-quality Eastern Europe

The COVID-19 pandemic has drawn attention to a pre-existing threat to global health: the quality of air in cities around the world. Prolonged exposure to air pollution has been found to increase the mortality rate of COVID-19. This is a particular concern for much of Eastern Europe, where emissions regularly exceed safe levels. This policy brief analyses recent data on air quality in the region and the factors that explain a persistent East-West divide in pollution in Europe. It concludes by evaluating to what extent lockdowns in 2020 provided a temporary respite from pollution in the region. 

Introduction

The WHO estimates that air pollution causes seven million premature deaths every year (WHO 2018). COVID-19 has further amplified these health risks, as air pollution can increase both the chance of catching respiratory diseases and their severity. At the same time, the pandemic has resulted in lockdowns and a general slowdown in economic activity which are widely perceived as having led to a temporary improvement in air quality.

This brief provides an overview of recent trends in air quality in Eastern European cities using data from the World Air Quality Index. It addresses three questions:

  1. How did air pollution in Eastern Europe compare to Western Europe prior to the pandemic?
  2. What are the main sources of air pollution in Eastern European cities and can they be addressed by policymakers?
  3. Was there a significant improvement in air quality in 2020 as a result of COVID-19?

Air Pollution in Eastern Europe

Most measures of air quality in Europe show a stark East-West divide. Map 1 plots the share of days in 2019 where air pollution, as measured by PM 2.5 (fine particulate matter), exceeded levels classified as unhealthy for the general population. On average, cities to the east of the former Iron Curtain experienced over 100 such days, compared to an average of 20 days in Western Europe. These averages mask significant variation within both regions; Tallinn was among the best performing cities while Naples was among the worst.

Map 1

Source: Author’s calculations based on data from the World Air Quality Index COVID-19 dataset. Above the threshold AQI of 150, PM 2.5 levels are classified as unhealthy to the general population by the US EPA.

The gap in air quality between Eastern and Western Europe has been linked to differences in health outcomes for decades. Shortly after the fall of the Soviet Union, Bobak and Feachem (1995) found that air pollution accounted for a significant share of the Czech Republic and Poland’s mortality gap with respect to Western Europe. The European Environment Agency’s 2020 report provides estimates for ‘years of life lost’ attributable to different pollutants. Figure 1, which plots these estimates for PM 2.5, highlights the fact that Eastern European countries, in particular those in the Balkans, continue to experience significantly higher mortality related to pollution, as compared to their Western European counterparts.

Figure 1

Source: estimates from EEA Air Quality in Europe report 2020

Sources of Air Pollution

A number of factors contribute to the pattern of pollution shown on Map 1, not all of which are under policymakers’ direct control. For example, two of the cities on the map with the unhealthiest air – Sarajevo and Skopje – are surrounded by mountains that prevent emissions from dissipating.

In addition to immutable geographic factors, policies elsewhere may also be contributing to pollution in the region. Stricter regulations in Western Europe can have adverse effects if they result in polluting industries migrating eastwards. Bagayev and Lochard (2017) show that as EU countries adopt new air pollution regulations, the share of their imports from Eastern Europe and Central Asia in pollution-intensive sectors increases. Stricter rules can also result in outdated technology being exported to other countries. A Transport & Environment report found that over 30,000 high-emission diesel cars were exported from Western Europe to Bulgaria in 2017 and argued that such flows will continue as Western European cities impose Low Emission Zones and diesel bans (Transport & Environment 2018).

Power generation, and in particular coal power, is likely to be the single most important determinant of the gap in air quality between Eastern and Western European cities. Coal power accounts for over 60% of electricity production in Poland, Serbia, Bosnia Herzegovina, and North Macedonia, and remains an important energy source in the majority of Eastern European countries (BP 2020). Many of the coal power plants in the region have been operating for decades and are not equipped with modern desulphurisation technology that would help to reduce their emissions. A report by the Health and Environment Alliance found that 16 coal power plants in the Western Balkans collectively produce more emissions than the 250 power plants in the European Union, while only being able to generate 6% of the power (Matkovic Puljic et al. 2019).

Countries in the region are taking steps to reduce their dependence on coal power. In September 2020, the Polish government struck an agreement with labour unions that would see coal phased out by 2049. Coal accounts for 75% of Poland’s current electricity and Map 1 shows that air in the Upper Silesian Coal Basin, in the south of the country, is particularly polluted. Despite such commitments, Western European countries have in recent years been faster at transitioning away from coal. If this trend continues, the gap in air quality may even increase in the short run.

Did COVID-19 Improve Air Quality?

Last spring, a number of headlines from around the world featured the phrase “A breath of fresh air” (e.g. ReutersThe Economic Times, EUIdeas). These articles described measurable improvements in air quality in cities with government-mandated lockdowns. Recent academic publications have confirmed these reports in a variety of settings including the US (Berman and Ebisu 2020), China (Chen et al. 2020), and Korea (Ju et al. 2020).

While Eastern Europe was less affected by the initial wave of COVID-19 than Western Europe, most countries imposed lockdowns and social distancing measures that can be expected to have affected air quality. Figure 2 uses daily data from the World Air Quality Index for 221 European cities to compare average air pollution in 2020 to 2019. Overall, these plots suggest that air quality did improve in Eastern European cities relative to the previous year. However, not all types of pollutants declined and the declines are slightly smaller on average than in Western European cities. Panels A, B, and C plot air quality indices for fine particulate matter (PM 2.5), nitrogen dioxide (NO2), and sulfur dioxide (SO2) respectively. Dots below the line represent cities where the average air quality index was lower (indicating less pollution) in 2020 than in 2019. The declines are largest for NO2 – a gas that is formed when fuel is burned. The reduction in traffic and transportation in all European cities is likely to have contributed to this drop. By contrast, there were no statistically significant declines in SO2. This may be due to the fact that power generation, which is the source of most SO2 emissions, was less affected by lockdowns than transportation.

Figure 2

Panel A

Panel B

Panel C

Source: Author’s calculations based on the World Air Quality Index COVID-19 dataset. Each marker represents a city. Markers below the 45-degree line represent cities where emissions for the respective category of pollutant were lower in 2020 than in 2019. For reasons of presentation, outliers were excluded from panels B and C.

The variation in COVID-19 prevalence over the course of 2020 is visible when tracking pollution over time. Figure 3 shows that average daily NO2 emissions in Western European cities dropped most from March to June of 2020, during the first wave of the pandemic. NO2 levels were comparable to the previous year in July and August when case numbers fell and restrictions were lifted. In the last months of the year, as the second wave hit, NO2 emissions once more dropped below the previous year’s average. This pattern is similar for Eastern European cities but the decline in NO2 in the first half of the year is less pronounced.

Figure 3

Source: Author’s calculations based on the World Air Quality Index COVID-19 dataset. Lines show the seven day moving average of the ratio between average NO2 emissions in 2020 and 2019.

Conclusion

The COVID-19 epidemic has highlighted the health costs of air pollution. The preliminary evidence suggests that long-term exposure to pollution increased COVID-19 mortality rates (Cole et al. 2020, Wu et al. 2020). This is a particular concern for countries across Eastern Europe which – at the time of writing – are still grappling with the second wave of the pandemic in Europe. Many people in this region have been exposed to polluted air for decades.

The pandemic has also demonstrated that air quality can improve relatively quickly when human behaviour changes. The data described in this brief suggest that Eastern Europe was no exception in this regard, although the declines were confined to some categories of pollutants. Achieving a more general, and sustained improvement in air quality will require a shift from coal power towards cleaner forms of energy.

Stimulus packages aimed at a post-pandemic economic recovery can provide an opportunity for policy to reorient the economy and accelerate such a shift. The consultancy Vivid Economics, which rated G20 member countries’ proposed stimulus packages in terms of their environmental impact, found that the ‘greenest’ stimulus proposals are those of the European Commission, France, UK, and Germany. Russia is one of the worst performers on this index (Vivid Economics 2020). Whether governments in Eastern Europe are able to take advantage of this opportunity will depend on their respective fiscal space and whether they make improving air quality a priority.

References

  • Bagayev, Igor, and Julie Lochard, 2017. “EU air pollution regulation: A breath of fresh air for Eastern European polluting industries?.” Journal of Environmental Economics and Management 83: 145-163.
  • Berman, Jesse D., and Keita Ebisu. 2020 “Changes in US air pollution during the COVID-19 pandemic.” Science of the Total Environment 739: 139864.
  • BP 2020 “Statistical Review of World Energy – all data, 1965-2019
  • Bobak, Martin, and Richard GA Feachem. 1995. “Air pollution and mortality in central and eastern Europe: an estimate of the impact.” The European Journal of Public Health , no. 2: 82-86.
  • Cole, Matthew, Ceren Ozgen, and Eric Strobl, 2020. “Air pollution exposure and COVID-19.”.
  • Chen, Kai, Meng Wang, Conghong Huang, Patrick L. Kinney, and Paul T. Anastas, 2020. “Air pollution reduction and mortality benefit during the COVID-19 outbreak in China.” The Lancet Planetary Health 4, no. 6: e210-e212.
  • European Environment Agency 2020. “Air Quality in Europe – 2020 report“, EEA Report No 9/2020
  • Matkovic Puljic, V., D. Jones, C. Moore, L. Myllyvirta, R. Gierens, I. Kalaba, I. Ciuta, P. Gallop, and S. Risteska. 2019. “Chronic coal pollution–EU action on the Western Balkans will improve health and economies across Europe.” HEAL, CAN Europe, Sandbag, CEE Bankwatch Network and Europe Beyond Coal, Brussels.
  • Ju, Min Jae, Jaehyun Oh, and Yoon-Hyeong Choi. 2020. “Changes in air pollution levels after COVID-19 outbreak in Korea.” Science of The Total Environment 750: 141521.
  • Transport & Environment, 2018. “Briefing: Dirty diesels heading east
  • Vivid Economics, 2020. “Greenness of Stimulus Index” December 2020 update
  • World Air Quality Index, 2021. “Worldwide COVID-19 dataset
  • World Health Organization, 2018. “WHO Global Ambient Air Quality Database (update May 2018)”
  • Wu, Xiao, Rachel C. Nethery, Benjamin M. Sabath, Danielle Braun, and Francesca Dominici, 2020. “Exposure to air pollution and COVID-19 mortality in the United States.” medRxiv

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

The Impact of the COVID-19 Pandemic in Eastern Europe | Key Points From the 2020 SITE Development Day Conference

A black and white colour image with people walking through the tunnel wearing masks and representing COVID-19 in Eastern Europe

After having been relatively mildly affected in the first wave, Eastern Europe is currently in the midst of the second wave of the COVID-19 pandemic with much higher levels of infected and dead compared to the spring. This health crisis not only has economic consequences but also has contributed to political instability in parts of the region. This policy brief shortly summarizes the presentations and discussions held at the SITE Development Day 2020 Conference, focusing on the consequences of the COVID-19 pandemic in Eastern Europe. 

A Swedish Government Perspective

The conference started with the Swedish Minister of International Development Cooperation, Peter Eriksson, discussing the current situation in Eastern Europe with a particular focus on the partnership with Sweden.

According to Minister Eriksson, Swedish foreign policy in general, and foreign aid policy in particular, has historically paid too little attention to Eastern Europe. He has therefore emphasized that Swedish aid should be used to promote democracy and human rights in the region. As the pandemic has exacerbated global anti-democratic trends and intensified existing inequalities, international support and cooperation have become more essential than ever.

Minister Eriksson mentioned several priority areas of Swedish aid policy in the region, such as the fight against corruption, economic reforms for poverty alleviation, gender equality, and media freedom. Emphasizing the importance of the latter, Minister Eriksson mentioned education for journalists and financial support for small independent media as important Swedish efforts in the region. He stressed that the protection of pluralistic media is also a military security matter, as countries like Georgia and Ukraine have been targets of foreign disinformation campaigns. The importance to support democracy and civil society was also illustrated by the case of Belarus, where all ongoing projects in partnership with the state or state-affiliated organizations have been suspended. The Swedish government has successfully implemented regional projects in energy efficiency and water purification, although Minister Eriksson underlined that the need for measures to slow down climate change is intensifying.  

The important role of European Union membership was also mentioned. Minister Eriksson argued that the incentives created by potential EU membership have been the main drivers of democratization, modernization, and poverty reduction as well as progress towards greener economies in the region.

In response to the pandemic, Sweden, as well as the European Union, have increased aid transfers to Eastern Europe. Minister Eriksson underlined, though, the need to not only support immediately affected sectors and outcomes, as the pandemic has many serious spillover effects in other areas already in need of help prior to the crisis.

The Economic Outlook for the Region

The second section of the conference provided a current account of the economic situation in the region by two speakers from different sectors.

Alexander Plekhanov, director for Transition Impact and Global Economics at the European Bank for Reconstruction and Development (EBRD), shared results from an EBRD survey on the impact of the pandemic. The survey was conducted in August and covered 8 emerging economies in Eastern Europe and 6 more advanced countries for comparison.

Analysis of the survey responses shows that the impact of the crisis is very broad. The share of respondents that had lost their job was 15% in emerging economies, and almost twice as high in advanced economies. Many factors contributed to this gap. One affected area was tourism, with international tourism being particularly important in many emerging economies, and hard to replace with increased domestic tourism. The outbound relative to inbound tourism for countries like Sweden and the UK equals a factor of 3 and 2 respectively, while the corresponding in emerging economies is often below 1.

Compared to the 2008 financial crisis, the economic impact over the first five months of the pandemic was at similar aggregate levels, but more unequal across socio-economic groups. For instance, job losses were higher among the young and those with lower income and with less education. Yet, the overall impact in emerging economies was 10% less unequal than in advanced economies due to differences in the structures of economies and the feasibility of working from home.

Fredrik Rågmark, the CEO of Medicover, a healthcare and diagnostics services provider operating in the region in the last 25 years, provided insights from a business perspective.

Similar to Minister Eriksson, Rågmark argued that, for Medicover, the biggest change in the region over recent years has been related to EU integration, and in particular to Poland becoming an EU Member. Rågmark noted that the change was not limited to Poland: all the countries in the region are on a trajectory of change but at different stages. In his mind, the biggest difference between the emerging Eastern Europe and the West is that people have higher expectations about the future in the East.

Rågmark recognized that corruption has been a major challenge for the region in attracting business and investors, but also that it has gotten significantly better in recent years. The EU integration process has been essential there, as membership and continued support relies on institutional reforms to improve governance and ensure political accountability. Recognizing the risk that governments lose incentives to continue reforms once membership is secured (currently exemplified by the policies in Hungary and Poland), Rågmark yet emphasized that the European Union has been extremely successful in improving the business climate in the region and should receive more recognition than it often does.

As for the COVID-19 crisis, Rågmark argued that Plekanovs description was very representative of what he has seen in Eastern Europe. Medicover experienced a drastic falloff in late March when people were not allowed to visit the hospital unless they had acute symptoms. When countries re-opened in the summer, the company had a strong rebound of replaced demand from the lockdown. Also, Medicover has contributed significantly to the testing effort across the region. Due to the challenges associated with the skyrocketing demand for PCR testing, many countries in Eastern Europe that previously only allowed the public sector to treat inpatient COVID-19 cases, have opened up ambulatory services to the private sector. In terms of scaling up testing capacity, the private sector has been very important. Medicover is now a major provider of PCR-testing in Ukraine and Poland, and the single largest provider in Romania.

Economic Policy Responses to the Crisis: Regional Experiences

In this section, experts from the FREE network provided brief overviews of the current situation in their respective countries, as well as the major developments during the year.

Belarus

The Academic Director of BEROC, Kataryna Bornukova, provided an alarming description of recent developments in Belarus. Even before 2020, the prospects of the Belarussian economy did not look great. As relations with Russia started to worsen, the year began with shortages in the oil supply which contributed to GDP contraction already in the first quarter. When the pandemic hit Belarus in the spring the government neglected its severity. Initially, no measures of economic relief were introduced and there are valid suspicions that the official COVID-19 statistics were inaccurate. Eventually, the government created incentives for state-owned companies to keep up output, slowing down the GDP contraction in the second quarter. However, these measures are now a source of financial risk for the whole country as the state has accumulated huge inventories and substantially increased public debt. Unfortunately, during the second wave, policy responses are still lacking and the ongoing political crisis worsens the situation as it hampers economic development through increased uncertainty and lowered public trust.

Poland

As for Poland, Michal Myck, director of CenEA, argued that development during the crises has been mixed both in terms of the pandemic itself and government response.

While infections were at low levels during the first wave in April, they increased sharply during the second wave at the end of October. Similar to Belarus, there have been significant political developments over the year such as the presidential election campaign and the “Women’s Strike”. Myck suggested that these events have complicated a clear strategic response to the virus. During the summer, the government shifted its attention away from preparations for the second wave, towards the July elections. The first wave was met by fiscal and monetary stimulus packages. Although employment and growth have not fallen that much relative to neighboring countries, Myck argued that Poland will be left with a significantly higher level of public debt and other challenges when the pandemic is over. 

Georgia

Giorgi Papava, Center Head at ISET-PI, explained that the Georgian government declared a state of emergency and lockdown in March, despite the low number of infections at the time. From April to June, the economy then experienced a 13% drop in GDP. After the economy re-opened at the end of June, it has shown a slight recovery over the summer. Unfortunately, it was followed by a sharp increase in infections in the autumn. This second wave was not met by similar restrictions until after the elections at the end of November, again suggesting the role of politics in the pandemic response in the region. In terms of economic impact, the most severe blow for Georgia was the sharp decline in tourism affecting many sectors including hospitality and food services, construction, arts, entertainment, and recreation. 

Ukraine

Olena Sholomytska, Senior Researcher at KSE, explained how Ukraine, like most other countries in the region, experienced low reported infection rates in the spring, though high detection rates and low levels of testing may suggest that real infection rates were higher. The summer was followed by a sharp increase in infections and the situation has worsened since then. The economy saw a 7.5% drop in GDP in the second quarter, partly due to a strict lockdown policy, followed by a slight recovery in the third. The Ukrainian government has introduced various monetary and fiscal measures for both households and firms including cash allowances for self-employed, small firms, and people with temporary pay cuts, as well as long-term financing for banks up to 5 years. Currently, the government is reluctant to enforce stricter measures to prevent the second wave of infections mainly for political reasons. Ukrainians are becoming less afraid of the virus and more discontent with the restrictions, so the government is concerned about taking an unpopular decision.

Russia

Natalya Volchkova, Director at CEFIR at NES, explained how Russia, after a relatively calm summer, was hit by the second wave in October as the number of infections and COVID-19 deaths reached their highest levels since the onset of the pandemic. As far as economic performance is concerned, monthly indicators of economic activity show a sharp decline at the beginning of March and a slight recovery since then. However, when looking at month-on-month comparisons, economic performance is significantly lower in every month throughout 2020 compared to 2019.

The support measures introduced during the spring and summer constituted 3.7% of GDP. While most stimulus was allocated to the corporate sector (2.1%) households also received a significant amount of support (1.6%). The measures targeted to help household income included: cash transfers to families with children; increased unemployment benefits; 2019 tax-return for self-employed; extra payments to medical specialists; and credit restructuring and penalty-free payment deferrals for COVID-19 infected. The support dedicated to the business sector included: tax and credit payment deferrals; bankruptcy moratorium for 6 months; reduction in property tax: and subsidies to backbone enterprises. The support measures are expected to increase GDP growth by 1.8 percentage points by boosting household consumption, corporate inventory, and investments.

Latvia

Sergej Gubin, Research Fellow at BICEPS, described the epidemiological impact of the pandemic in the spring as hardly noticeable in Latvia. Although, the country currently has the 3rd lowest COVID-19 mortality rate in the EU, infections and mortality have increased quite dramatically during the fall.

While the restrictions introduced in the spring did not include a strict lockdown or a mandatory mask policy, the government closed borders, schools, and kindergartens. Following the second wave, the restrictions adjusted to including a mask policy, open borders, and 5-12 graders on distance learning.

The economic policy response has included downtime benefits for employees of firms with a reduction in turnover of 30% or more, temporary tax reliefs, and sick leave benefits for parents with young children on distance learning. The drop in GDP for 2020 is projected to be 7% and unemployment is expected to increase by 7.7%.

The Implications of the Pandemic for Gender Inequality

It is widely known that the pandemic has had catastrophic consequences for health and economic activity. Many experts, though, have also expressed concerns about its impact on gender equality and the welfare of women. On the health side, men and women have been shown to be equally susceptible to infection, however among those that get infected women have significantly lower mortality rates than men. Monika Oczkowska, Senior Researcher at CenEA, showed that about 40 % of deaths in Poland were women, which is very similar to Western European countries, whereas excess mortality has been particularly high among men in older age groups.

The pandemic has also impacted gender inequality through the labor market. In countries like Ukraine and Georgia, the pandemic has significantly worsened pre-existing inequalities. In the latter, the number of registered unemployed increased by 16 000 in the second quarter, and among them, 90% were women, according to Yaroslava Babych, Policy Center Head at ISET-PI. Also, among the 44 000 workers that lost their employment during lockdown in the spring a vast majority were women. Partly, the reason for this is that the restrictions affected sectors that were predominantly female such as restaurants, cafés, and retail, as well as arts and entertainment.

In Belarus, a country with relatively high female labor force participation, the impact on gender inequality changed over time. In the Belarussian labor market, women are highly concentrated in the hospitality and public sector, and men in the industrial sector. After the first wave in the spring, women were worst affected, both in terms of unemployment and loss of income, which was largely driven by the impact on the hospitality industry. Over time men became more affected as the industrial sector took a hit, whereas women benefitted from steady employment within the public sector. The gender distribution in the Ukrainian labor market is similar to the Belarusian. Women are concentrated in sectors that are economically vulnerable to the crisis but also in those that are critical for everyday life such as the health and education sectors. In other words, in these countries some women are at high risk of losing their job while others, that are less at risk of an economic shock, often are particularly likely to be exposed to health shocks.

From a more positive perspective, the crisis has also brought about structural changes to the labor market that could potentially improve gender equality. In Russia, workplaces have started to provide more flexible working conditions which have enabled more women to work remotely from home.

One serious consequence of the crises is an increase in domestic violence as the pandemic has exacerbated things that are known to increase conflict and violence within households. Maria Perrotta Berlin, Assistant professor at SITE, argued that mobility restrictions have increased the time spent with family members, increased isolation from social networks and support organizations, and increased stress caused by economic insecurity. According to the international ombudsman of Russia, the number of distress calls relating to intimate partner violence has increased by 150% during the pandemic, compared to an estimated average increase of 60% in Europe during the same time.

Political Implications in the Region with a Special Focus on Belarus and Russia

The final section of the day focused on political developments in Russia and Belarus in the times of the COVID-19 pandemic, two countries with close historical, political and economic ties. SITE invited two experts on the politics in respective countries: Elena Panfilova, Founder of the Center for Anti-corruption Research and former Chair of Initiative Transparency International – Russia, and Artyom Shraibman, founder of Sense Analytics, a political consultancy in Minsk and nonresident scholar at the Carnegie Moscow Center.

Panfilova gave a comprehensive narrative of the recent political developments in Russia related to the onset of the pandemic. Panfilova argued that the political response to the pandemic in Russia changed over time. In the spring, the government and political elites had a relatively active response and clear communication with the public. However, when the second wave started in September the government largely stayed silent. According to Panfilova, the reason for this is that Russian politicians started to anticipate the important 2021 regional elections and that they found it hard to communicate with the public without challenging their future political interests as the crisis response had been met with much discontent. This discontent, Panfilova argued, had to do with Russia’s vertical system of accountability being very ineffective in dealing with a horizontal problem such as COVID-19. The response system would have needed help across the political spectrum and would have benefited from more transparency to fight the pandemic; instead, the government continued to restrict political freedom and civil rights.

Reacting to the introduction by Panfilova, Shraibman argued that there is no historic example of a situation where the response to similar situations have differed so much between the Belarusian and Russian governments. The Belarusian regime’s response, in contrast to the Russian, was close to non-existent in the first wave and this continued up until the autumn when the government started to introduce restrictions in response to the second wave of infections.

The pressure of the pandemic has revealed the weaknesses and flaws of governments around the world and not least in Belarus. Although there are several reasons for the political crisis such as the stagnation of the Belarus economy, Shraibman argued that the mismanagement of the pandemic became the tipping point.

Shraibman explained how the Belarus regime has always tried to sell a paternalistic identity and has presented itself as a stable and fair welfare system that cares for the poor and the vulnerable. The mishandling of the COVID-19 pandemic shattered this identity in the eyes of the public. The rhetoric and state-level deception during the first wave irritated a lot of people as the state-owned media outlets often accused the sick of being weak and ridiculed people for wearing masks. As many Belarusians saw relatives die and doctors started to contradict the narrative of the state, people were reminded of the Soviet government’s concealment of the Chernobyl disaster.

These developments created stress on the Belarusian society right before the presidential elections in August since the frustration that had been accumulated was channeled into political activity. During the pandemic, people learned how to organize and coordinate crowdfunding initiatives to support doctors and similar initiatives. This self-organization infrastructure transferred to the opposition campaign and is now used to support victims of political repression.

During the second wave, the government started exploiting the crisis to restrict political freedom. For instance, independent observers were not allowed to observe electoral polls, and political prisoners were not allowed to meet with lawyers. These and similar actions have further aggravated the political discontent with the regime in the country. Shraibman concluded that groups in society that previously have been apolitical now have become politicized, as they have personally experienced the repressive measures previously targeted primarily to the Belarusian opposition.

Concluding Remarks

As in previous years, the Development Day conference offered us an opportunity to invite a diverse group of experts, politicians, and practitioners to discuss a current and important topic in the area of development and transition. The different perspectives highlighted the multifaceted impact of the COVID-19 pandemic on Eastern Europe, as well as the continued engagement of Swedish society in the region. Unfortunately, the pandemic also prevented us from meeting in person this time, but we hope that next year we will be able to meet again at the Stockholm School of Economics.  

List of Participants

  • Peter Eriksson, Minister for International Development Cooperation, Sweden.
  • Alexander Plekhanov, director for Transition Impact and Global Economics, EBRD.
  • Fredrik Rågmark, CEO Medicover, Sweden.
  • Kataryna Bornukova, Academic Director BEROC, Minsk, Belarus.
  • Michal Myck, Director CenEA, Szczecin Poland.
  • Giorgi Papava, Center Head at ISET-PI, Tbilisi, Georgia.
  • Olena Sholomytska, Senior Researcher KSE, Kyiv, Ukraine.
  • Natalya Volchkova, Director CEFOR at NES, Moscow, Russia.
  • Sergej Gubin, Research Fellow BICEPS, Riga, Latvia.
  • Lev Lvovskiy, Research Fellow BEROC, Minsk, Belarus.
  • Monika Oczkowska, Senior Research Economist CenEA, Szczecin, Poland.
  • Yaroslava Babych, Head of Macroeconomic Policy Research Center ISET-PI, Tbilisi, Georgia.
  • Aleksandr Grigoryan, Associate Professor American University of Armenia, Yerevan, Armenia.
  • Olga Kupets, Policy Professor KSE, Kyiv, Ukraine.
  • Maria Perrotta Berlin, Assistant Professor SITE, Stockholm, Sweden.
  • Artyom Shraibman, founder of Sense Analytics and nonresident scholar at the Carnegie Moscow Center.
  • Elena Panfilova, Founder of the Center for Anti-corruption Research and former Chair of Initiative Transparency International – Russia.

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Public Healthcare Expenditures in Transition Countries: Does Government Spending Respond to Public Preferences?

An image of surgery room with two doctors in green protection gear representing public healthcare expenditures

The transition from centrally planned to free-market economies in 1989 initiated a period of social and economic upheaval in post-communist countries, which affected healthcare quality, expenditures, and outcomes. We use data from the Life in Transition Survey (LiTS) to demonstrate that in spite of improvements across various measures of these facets of the healthcare system, it remains the first choice for additional government spending among the public in all countries of the region included in this study. Preferences in priorities for extra budget spending were similar among men and women in respective countries, but the preference for additional healthcare spending was stronger among women than men. The transition countries are compared with Germany and Italy – two Western European LiTs survey participants, countries with higher spending, and better healthcare outcomes.

Introduction

Across the globe, the outbreak of the COVID-19 pandemic has brought a new spotlight to the preparedness of healthcare systems for profound shocks (Anser et al, 2020). Critical care is a particularly costly element of healthcare provision, and thus, under-resourced systems are uniquely susceptible to spikes in mortality resulting from an oversaturation of intensive care units during an epidemiological crisis of this sort. (Fowler et al, 2008; Mannucci et al, 2020) Considering the widespread discussion surrounding health system capacity and the necessity for implementing economically painful lockdowns when those limits are reached, pressure from society to increase public spending may grow even further. With these developments in mind, in this policy paper, we confront past expressions of preferences regarding public expenditures with changes in government spending on healthcare between 2006 and 2017. The analysis draws on the one hand on the data from the Life in Transition Survey (LiTS), and on the other on publicly available data on government expenditures and outcomes.

In the context of preferences for additional public spending, we present a descriptive summary of trends in government expenditures on healthcare in Armenia, Belarus, Estonia, Georgia, Latvia, Lithuania, Moldova, Poland, Russia, and Ukraine. We include Italy and Germany as wealthier Western benchmarks, for which the data became available in the second wave of the survey in 2010. Data on public healthcare spending shows that despite a clear and strong public preference for increased investment in healthcare provision, additional spending as a proportion of total government expenditures between 2006 and 2017 has been moderate in most countries, and even negative in some. It must be underlined that expenditures are not always reflected in healthcare outcomes, quality, and coverage. Issues of efficiency, system design, and underlying health conditions of the population play a significant role in the returns on investment. For instance, the United States has spent drastically more per capita on healthcare than any other country and yet ranked lowest in the Healthcare Access and Quality (HAQ) Index among comparable countries (Fullman et al, 2016). However, due to the focus of the survey on government spending, we emphasize government expenditures on healthcare as a pertinent measure, especially in relation to overall GDP, per capita spending, and the public budget as a whole.

There is mounting evidence that one of the most important elements in the mitigation of COVID-19 mortality is the ability to expand system capacity and acquire the necessary equipment (e.g. respirators, ventilators) while ensuring that there is equitable access to measures for spread prevention (e.g. testing) (Khan et al, 2020; Ranney et al, 2020; Wang and Tang, 2020). The increasing pressure on healthcare systems, coupled with the additional fiscal strain resulting from the economic fallout of the pandemic, could lead to further divergence between public preferences and government spending on healthcare.

Healthcare Systems During the Transition

The ability of transition countries to absorb the risks and short-term economic shocks associated with pivoting from a centrally planned to a free-market economy has had dramatic implications for healthcare systems. Although countries in this region were divergent in terms of underlying health conditions, levels of expenditures, and health outcomes, most of them fell victims to deficient funding and additional health risks associated with the initial increases in poverty that were commonplace (Adeyi et al, 1997)

Compared to other transition countries, Georgia and Armenia faced a sharper economic collapse as well as armed conflicts, which caused scarcity in the availability of public healthcare providers and spikes in out-of-pocket expenses. Belarus was slower in the implementation of economic reforms and faced issues of fiscal sustainability further down the line (Balabanova et al, 2012). However, following this short tumultuous period, countries transitioning away from centrally planned economies have generally invested heavily in healthcare since the early 1990s. In many cases, these investments were facilitated by rapid GDP growth and accompanied by significant improvements in life expectancy. For example, between 1989 and 2012, Latvia, Lithuania, and Poland increased their per capita healthcare expenditures by more than 1,000 PPP per year, with an increase in life expectancy ranging from 1.7 years in Lithuania to 5.8 years in Poland (Jakovljevic et al, 2015). Despite heterogeneous and extensive reforms in many of these countries, as well as mixed results in measurements of efficiency and outcomes, healthcare expenditures consistently rank as the top priority for further government spending among both men and women in each country. This consistency lends itself to further policy considerations.

Preferences for Government Spending in Transition Countries

As is demonstrated by Figure 1, in 2016, healthcare was the most common answer to the question – “Which field should be the first priority for extra government spending?”- for all ten post-transition countries included in our analysis (the other options were: education, housing, pensions, assisting the poor, public infrastructure, the environment, and other). The survey was carried out on a representative sample that covers approximately 1,000+ respondents from each of the 29 countries in wave I and up to 1,500+ respondents from each of the 34 countries in wave III (EBRD: LiTS, 2020). Despite intercountry differences, in 2016 healthcare persisted as the top priority for both men and women in every transition country we studied apart from Belarus. While healthcare remained the top priority on average, men expressed a higher preference for additional investment in education. In the countries where preferences for health were particularly strong, healthcare was the first priority for as many as 53.5% of Latvians, 47.7% of Poles, and 43.9% of Moldovans (Figure 1a). Notwithstanding some fluctuations in scale, these preferences were not only common across countries but also across time, with people expressing very similar preferences in the first two waves of the survey in 2006 and 2010. (See Annex Figure A1 and Figure A2). While healthcare remained a popular choice in Germany and Italy, spending on healthcare as a percentage of GDP was nearly twice that of any transition country in Germany. There, education outweighed healthcare among men and women in both available waves (II and III), while pensions surpassed healthcare among men in the latter wave. In Italy, despite a more comparable level of healthcare spending relative to the transition countries, a drastic shift took place as healthcare fell from being the first priority by a large margin of 24.9 percentage points (pp) in 2010 to becoming the second priority after pensions in 2016. This can likely be attributed to the prominence of pensions as a major political campaign issue following the austerity-driven reforms of 2011 (Alfonso and Bulfone, 2019).

 

Figure 1: 1a (left) : Preferences for additional government spending, 2016. / 1b (right): Preferences for additional healthcare spending by gender, 2016

Source: LiTS Wave III data (2016). Notes: Figures show proportions of declared preferences as replies to the question: “Which field should be the first priority for extra government spending?” For clarity of exposition the category ‘social assistance’ aggregates first priority choices of ‘assisting the poor’ and ‘housing’; the category ‘other’ also includes the least popular choices ‘public infrastructure’ and ‘environment’.

Moreover, it is evident that men and women within countries have rather similar preferences, as far as extra government spending is concerned. Not only is healthcare the first priority in all ten transition countries, but their second, third, and fourth choices are also very similar. When digging deeper into the differences that do exist, in every country except for Georgia women had a stronger preference for healthcare than men, and by as much as 8.8 pp, 8.4 pp, 7.8 pp, and 7.9 pp in Latvia, Germany, Belarus, and Russia respectively (Figure 1b). Conversely, in every case except for Georgia and Ukraine, men had a stronger preference for additional spending on education than women, most notably in Armenia – by 7.8 pp, Germany – by 5.7 pp, Lithuania – by 4.6 pp and Poland – by 3.9 pp. It is apparent that despite rapid investment in healthcare over the first two decades of the transition, there remains a widespread desire for further expansion of expenditures in this area.

Trends in Government Expenditures, 2006-2017

Considering the primacy of healthcare as the priority for additional government spending in all ten studied transition countries, we look at trends in aggregate statistics on government expenditures on healthcare over the surveyed period to explore the extent to which these preferences have been reflected in government spending. Taking the most basic measure into account in Figure 2a, i.e. public health expenditures as a percentage of GDP, among the transition countries only Georgia and Estonia have significantly increased their healthcare expenditures, by 1.6 pp and 1.2 pp, respectively. Lithuania, Poland, and Russia saw more moderate increases in the range of 0.6 pp and 0.2 pp. Other countries have remained essentially stagnant, apart from Moldova and Ukraine which saw a notable drop of 0.8 pp.  Considering that this measure is sensitive to fluctuations in GDP growth, we also consider public health spending as a proportion of all government expenditures (see figure A3 in the Annex), which is a better indicator of government priorities for additional spending from 2006 until 2017. Georgia was the only transition country with a significant increase in healthcare spending proportional to total government expenditures, nearly doubling it from 5.2% to 9.5%. Belarus, Estonia, Lithuania, Poland have implemented a more moderate redirection of the budget towards healthcare, increasing proportional expenditures by a factor of 1.26, 1.15, 1.21, and 1.21 respectively. In spite of public preferences, Armenia decreased the proportional share of the budget dedicated to healthcare by as much as 2.6 pp, Moldova, Russia, and Ukraine by 1.3 pp, and Latvia by 0.8 pp. Regardless of the direction of the trend, notwithstanding some slight convergence, no transition country spent as much of its budget on healthcare as Italy and Germany. The latter spent nearly two to four times as much on healthcare as a proportion of total expenditures compared to the studied transition countries, and this gap has been widening relative to all of those included in the analysis, apart from Georgia.

Figure 2: Public healthcare expenditures (% of GDP)

Source: WHO, 2020

While expenditures per capita are less indicative of government priorities in the budget, they are a better comparative measure for assessing the changes in healthcare provision, barring differences in efficiency. This comes with a huge caveat, namely that it is well established in the literature that additional healthcare expenditures often translate into “small to moderate” direct improvements in healthcare quality and outcomes due to inefficient spending or underlying factors (e.g. lifestyle choices, poverty) that are not addressed by investment in the healthcare system itself (Hussey et al, 2013; Self and Grabowski, 2003).  Nevertheless, this measure is more likely to translate to an improvement in the quality of care each person receives, and the data paints a more positive picture considering the clear preference of both men and women for higher spending. In Figure 3 we present healthcare expenditures per capita in USD, and apart from Italy and Ukraine, all of the countries have significantly increased spending between 2006 and 2017. While expenditures per capita in transition countries are dwarfed by Germany and Italy, Estonia, Georgia, and Lithuania have more than doubled their expenditures, and Armenia has more than tripled. Belarus, Latvia, Poland, Moldova, and Russia have also significantly increased their per capita spending on healthcare, by factors in the range of 1.54 and 1.91. However, while expenditures per capita is one indicator of improving healthcare quality, it does not identify government priorities and is largely dependent on overall economic growth (Fuchs, 2013; Bedir, 2016).

Figure 3: Health care expenditure per capita, USD

Source: WHO, 2020

In every country we include, increasing healthcare expenditure per capita is accompanied by advancements in many measures of healthcare outcomes for men and women. Between 2006-2017, life expectancy at birth increased across the board, with men in Russia experiencing the greatest improvement of 7.1 years (Figure 4a). These are promising trends – for women, life expectancy at birth improved by a larger margin in each transition country than in Germany or Italy, and the same can be said for men in every country apart from Armenia. Furthermore, the Healthcare Access and Quality (HAQ) index, which is composed of 32 indicators related to preventable causes of mortality, has improved across all 12 countries between 2005-2016. The change was most notable in Armenia, Belarus, Estonia, and Russia, constituting as much as 8.7, 10.2, 8.9, and 8.9 points out of a hundred, respectively (Figure 4b). These trends indicate convergence in the quality of healthcare as they significantly outpaced improvements in the HAQ index in Italy (3.1 points) and Germany (3.9 points). As of 2016, among the countries of interest, Georgia (67.1 points) and Moldova (67.4) had the lowest scores, while Germany (92.0) and Italy (94.9) scored highest, as could be expected based on healthcare spending measures presented in Figures 2 and 3.

Figure 4: 4a (left): Change in life expectancy, 2006-2017 / 4b (right): HAQ index

Source 4a: The World Bank (2020). Source 4b: Institute for Health Metrics and Evaluation (2018). Notes: The HAQ index is composed of 32 indicators, each related to a cause of death that is preventable with the proper healthcare. The scale ranges from 0 (worst) to 100 (best).

However, as presented in Figure 5, there is no clear relationship between the strength of the preference for additional healthcare spending and the scale of expansion in spending. Taking three of the four countries (Armenia, Belarus, and Russia) with the greatest improvement in the HAQ index as an example, there was virtually no change in healthcare spending as a percentage of GDP over the same period. These countries were also different in terms of how strong the preferences were for additional spending on healthcare as the first priority in 2006.

Figure 5: Public preferences and government healthcare spending (% of GDP)

Source: LiTS Wave I data (2006), The World Bank (2020). Notes: Germany and Italy were not included in the 2006 wave of the LiTS survey; thus, they are not shown here.

Conclusion

As we have demonstrated in this brief, in the ten post-communist countries for which we have analyzed LiTS data, there was a consistent and common preference for healthcare as the first priority for extra government spending between 2006 and 2016. We also find that in each country except Georgia, on average, women had a stronger preference for additional public healthcare spending, supporting a wealth of literature that suggests that women utilize healthcare services more frequently and spend more out of pocket on healthcare than men (Owens, 2008; Cylus et al, 2011; Williams et al, 2017). However, over the period we study, these preferences have not translated directly into a reallocation of budgetary resources. The countries with the strongest preferences for additional healthcare spending in 2006 did not experience the highest increases in any of the discussed measures of public healthcare expenditures since then.

People living in Italy and Germany chose an increase in public spending on healthcare as their first priority less frequently than residents of post-transition countries. Better understanding these differences requires further research, but there is likely a combination of factors that play into this effect. For one, wealthier Western countries performed better when looking at simple measures of healthcare outcomes such as life expectancy and deaths from non-communicable diseases (WHO, 2020), and hence other priorities may have gained in salience. Furthermore, they allocated a greater proportion of the public budget towards healthcare. This in part stems from the significant challenges associated with the transition following 1989. Healthcare systems in post-communist countries experienced a fiscal shock when joining the global economy, with the loss of centrally controlled price mechanisms causing an increase in the relative prices of healthcare inputs such as medicines and equipment (Obrizan, 2017). This was exacerbated by a shrinking capability of governments to spend more on healthcare related to the general economic shocks at that time and led to the passing over of costs to patients in the form of out-of-pocket expenses (Balabanova, et al. 2012).  Although access to healthcare and the quality of that care have improved after the transition (Romaniuk and Szromek, 2016), these have failed to converge towards Western European countries on a number of substantial measures up to this point. Before the commencement of the COVID-19 pandemic, government healthcare spending did not reflect the preferences of the public in any of the ten studied transition countries. The outbreak of the pandemic has not only intensified the pressure on the healthcare system but also brought about a number of negative economic consequences. This combination can be expected to simultaneously increase the strain on the public budget and necessitate difficult decisions of reallocation at a time when fiscal sustainability during a global recession is already being brought under question (Creel, 2020).

References

Note: Annex included in the attached PDF.

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