Estimating the impact of virus testing strategies on the COVID-19 case fatality rate using fixed-effects models.

The SARS-CoV2 has now spread worldwide causing over four million deaths. Testing strategies are highly variable between countries and their impact on mortality is a major issue. Retrospective multicenter study with a prospective database on all inpatients throughout mainland France. Using fixed effects models, we exploit policy discontinuities at region borders in France to estimate the effect of testing on the case fatality rate. In France, testing policies are determined at a regional level, generating exogenous variation in testing rates between departments on each side of a region border. We compared all contiguous department pairs located on the opposite sides of a region border. The increase of one percentage point in the test rate is associated with a decrease of 0.0015 percentage point in the death rate, that is, for each additional 2000 tests, we could observe three fewer deaths. Our study suggests that COVID-19 population testing could have a significant impact on the mortality rate which should be considered in decision-making. As concern grows over the current second wave of COVID-19, our findings support the implementation of large-scale screening strategies in such epidemic contexts.

Taking off into the wind: Unemployment risk and state-Dependent government spending multipliers.

We propose a model with involuntary unemployment, incomplete markets, and nominal rigidity, in which the effects of government spending are state-dependent. An increase in government purchases raises aggregate demand, tightens the labor market and reduces unemployment. This in turn lowers unemployment risk and thus precautionary saving, leading to a larger response of private consumption than in a model with perfect insurance. The output multiplier is further amplified through a composition effect, as the fraction of high-consumption households in total population increases in response to the spending shock. These features, along with the matching frictions in the labor market, generate significantly larger multipliers in recessions than in expansions. As the pool of job seekers is larger during downturns than during expansions, the concavity of the job-finding probability with respect to market tightness implies that an increase in government spending reduces unemployment risk more in the former case than in the latter, giving rise to countercyclical multipliers.