Crisis severity, fiscal capacity, and COVID-19 spending: a cross-country analysis

Abstract

The COVID-19 global pandemic has prompted a variety of fiscal policy responses from national governments around the world. This research constructs a panel data set of 170 countries to investigate the impact of fiscal capacity and COVID-19 crisis severity on government spending during the pandemic, after controlling for socio-economic, political, and institutional factors. Using cluster analysis and multivariate regression, the results show that COVID-19 fiscal spending increased with the expansion of the pandemic, although spending on COVID-19 tended to decrease somewhat over time. We also find that countries with stronger fiscal capacity were associated with higher fiscal spending during the pandemic. Thus, our study suggests that the severity of the pandemic combined with the fiscal capacity of countries shaped government spending on COVID-19.

Notes

1 Thanks very much for the suggestion from one of the reviewers. We also tried to use the daily cumulative data to run all the regressions, and the results are similar. We will provide the alternative estimation results upon request.

2 Source: https://www.bioworld.com/articles/433360-this-virus-does-not-respect-borders-says-who-director-general-but-containment-still-possible?v = preview.

Additional information

Notes on contributors

Ping Zhang

Ping Zhang is an associate professor in the School of International Relations and Public Affairs at Fudan University, Shanghai, China. He got his Ph.D. in public administration and policy from the University of Georgia. His research interests include public finance, fiscal policy, property taxation, and intergovernmental fiscal relations. He was a recipient of the Pushan Award in World Economy.

Can Chen

Can Chen is an associate professor in the Andrew Young School of Policy Studies at Georgia State University. He got his Ph.D. in public administration from the University of Nebraska Omaha. His main research areas include infrastructure finance, fiscal transparency, and fiscal policies.

Yu Shi

Yu Shi is an associate professor at the College of Health and Public Service, University of North Texas. She received her Ph.D. in public administration from the University of Illinois at Chicago. Her research interests include financial management of state and local governments, fiscal policies, and fiscal federalism.