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We present a new estimator for causal effects with panel data that builds on insights behind the widely used difference-in-differences and synthetic control methods. Relative to these methods we find, both theoretically and empirically, that this “synthetic difference-in-differences” estimator has desirable robustness properties, and that it performs well in settings where the conventional estimators are commonly used in practice. We study the asymptotic behavior of the estimator when the systematic part of the outcome model includes latent unit factors interacted with latent time factors, and we present conditions for consistency and asymptotic normality.

Motivated by the effects of the COVID-19 pandemic, we present a theory of Keynesian supply shocks: shocks that reduce potential output in a sector of the economy, but that, by reducing demand in other sectors, ultimately push aggregate activity below potential. A Keynesian supply shock is more likely when the elasticity of substitution between sectors is relatively low, the intertemporal elasticity of substitution is relatively high, and markets are incomplete. Fiscal policy can display a smaller multiplier, but the insurance benefit of fiscal transfers can be enhanced. Firm exits and job destruction can amplify and propagate the shock.

The COVID-19 pandemic has catapulted scientific conversations and scientific divisions into the public consciousness. Epidemiology and economics have long operated in distinct silos, but the COVID-19 pandemic presents a complex and cross-disciplinary problem that impacts all facets of society. Many economists have recognized this and want to engage in efforts to mitigate and control the pandemic, but others seem more interested in attacking epidemiology than attacking the virus. As an epidemiologist, I call upon economists to join with us in combating COVID-19 and in preventing future pandemics. In this essay, I attempt to provide some insight for economists into how epidemiology works, where it doesn't work, and the much-needed answers that economists can help us obtain. I hope this will spur economists towards an epidemic-related economics that can provide a blueprint for a healthy economy and population.

BackgroundOver the past decades, US Congress enabled the US Food and Drug Administration (FDA) to facilitate and expedite drug development for serious conditions filling unmet medical needs with five special designations and review pathways: orphan, fast track, accelerated approval, priority review, and breakthrough therapy.ObjectivesThis study reviews the FDA’s five special designations for drug development regarding their safety, efficacy/clinical benefit, clinical trials, innovation, economic incentives, development timelines, and price.MethodsWe conducted a keyword search to identify studies analyzing the impact of the FDA's special designations (orphan, fast track, accelerated approval, priority review, and breakthrough therapy) on the safety, efficacy/clinical benefit, trials, innovativeness, economic incentives, development times, and pricing of new drugs. Results were summarized in a narrative overview.ResultsExpedited approval reduces new drugs’ time to market. However, faster drug development and regulatory review are associated with more unrecognized adverse events and post-marketing safety revisions. Clinical trials supporting special FDA approvals frequently use small, non-randomized, open-label designs. Required post-approval trials to monitor unknown adverse events are often delayed or not even initiated. Evidence suggests that drugs approved under special review pathways, marketed as “breakthroughs”, are more innovative and deliver a higher clinical benefit than those receiving standard FDA approval. Special designations are an economically viable strategy for investors and pharmaceutical companies to develop drugs for rare diseases with unmet medical needs, due to financial incentives, expedited development timelines, higher clinical trial success rates, alongside greater prices. Nonetheless, patients, physicians, and insurers are concerned about spending money on drugs without a proven benefit or even on drugs that turn out to be ineffective. While European countries established performance- and financial-based managed entry agreements to account for this uncertainty in clinical trial evidence and cost-effectiveness, the pricing and reimbursement of these drugs remain largely unregulated in the US.ConclusionSpecial FDA designations shorten clinical development and FDA approval times for new drugs treating rare and severe diseases with unmet medical needs. Special-designated drugs offer a greater clinical benefit to patients. However, physicians, patients, and insurers must be aware that special-designated drugs are often approved based on non-robust trials, associated with more unrecognized side effects, and sold for higher prices.

In response to the coronavirus disease 2019 (COVID-19) pandemic, several national governments have applied lockdown restrictions to reduce the infection rate. Here we perform a massive analysis on near–real-time Italian mobility data provided by Facebook to investigate how lockdown strategies affect economic conditions of individuals and local governments. We model the change in mobility as an exogenous shock similar to a natural disaster. We identify two ways through which mobility restrictions affect Italian citizens. First, we find that the impact of lockdown is stronger in municipalities with higher fiscal capacity. Second, we find evidence of a segregation effect, since mobility contraction is stronger in municipalities in which inequality is higher and for those where individuals have lower income per capita. Our results highlight both the social costs of lockdown and a challenge of unprecedented intensity: On the one hand, the crisis is inducing a sharp reduction of fiscal revenues for both national and local governments; on the other hand, a significant fiscal effort is needed to sustain the most fragile individuals and to mitigate the increase in poverty and inequality induced by the lockdown.

Abstract The COVID-19 crisis is likely to have dramatic consequences for progress on climate change. Imminent fiscal recovery packages could entrench or partly displace the current fossil-fuel-intensive economic system. Here, we survey 231 central bank officials, finance ministry officials, and other economic experts from G20 countries on the relative performance of 25 major fiscal recovery archetypes across four dimensions: speed of implementation, economic multiplier, climate impact potential, and overall desirability. We identify five policies with high potential on both economic multiplier and climate impact metrics: clean physical infrastructure, building efficiency retrofits, investment in education and training, natural capital investment, and clean R&D. In lower- and middle-income countries (LMICs) rural support spending is of particular value while clean R&D is less important. These recommendations are contextualized through analysis of the short-run impacts of COVID-19 on greenhouse gas curtailment and plausible medium-run shifts in the habits and behaviours of humans and institutions.

We examine the effect of Medicaid expansion under the Affordable Care Act (ACA) on substance use disorder (SUD) treatment utilization and financing. We combine data on admissions to specialty facilities and Medicaid-reimbursed prescriptions for medications commonly used to treat SUDs in nonspecialty outpatient settings with an event-study design. Several findings emerge from our study. First, among patients receiving specialty care, Medicaid coverage and payments increased. Second, the share of patients who were uninsured and who had treatment paid for by state and local government payments declined. Third, private insurance coverage and payments increased. Fourth, expansion also increased prescriptions for SUD medications reimbursed by Medicaid. Fifth, we find suggestive evidence that admissions to specialty treatment may have increased one or more years post-expansion. However, this finding is sensitive to specification and we observe differential pretrends between the treatment and comparison groups. Thus, our finding for admissions should be interpreted with caution.

Abstract The nature and scale of the shocks to the demand for, and the supply of, home childcare during the COVID-19 pandemic provide a unique opportunity to increase our understanding of the division of home labour and the determinants of specialization within the household. We collected real-time data on daily lives to document the impact of measures to control COVID-19 on UK families with children under the age of 12. We document that these families have been doing the equivalent of a working week in childcare, with mothers bearing most of the burden. The additional hours of childcare done by women are less sensitive to their employment than they are for men, leaving many women juggling work and (a lot more) childcare, with likely adverse effects on their mental health and future careers. However, some households, those in which men have not been working, have taken greater steps towards an equal allocation, offering the prospect of sharing the burden of childcare more equally in the future.

To explore the impact of coronavirus disease 2019 (COVID-19) on small businesses, we conducted a survey of more than 5,800 small businesses between March 28 and April 4, 2020. Several themes emerged. First, mass layoffs and closures had already occurred—just a few weeks into the crisis. Second, the risk of closure was negatively associated with the expected length of the crisis. Moreover, businesses had widely varying beliefs about the likely duration of COVID-related disruptions. Third, many small businesses are financially fragile: The median business with more than $10,000 in monthly expenses had only about 2 wk of cash on hand at the time of the survey. Fourth, the majority of businesses planned to seek funding through the Coronavirus Aid, Relief, and Economic Security (CARES) Act. However, many anticipated problems with accessing the program, such as bureaucratic hassles and difficulties establishing eligibility. Using experimental variation, we also assess take-up rates and business resilience effects for loans relative to grants-based programs.

We use insurance claims data covering 28% of individuals with employer-sponsored health insurance in the United States to study the variation in health spending on the privately insured, examine the structure of insurer-hospital contracts, and analyze the variation in hospital prices across the nation. Health spending per privately insured beneficiary differs by a factor of three across geographic areas and has a very low correlation with Medicare spending. For the privately insured, half of the spending variation is driven by price variation across regions, and half is driven by quantity variation. Prices vary substantially across regions, across hospitals within regions, and even within hospitals. For example, even for a nearly homogeneous service such as lower-limb magnetic resonance imaging, about a fifth of the total case-level price variation occurs within a hospital in the cross section. Hospital market structure is strongly associated with price levels and contract structure. Prices at monopoly hospitals are 12% higher than those in markets with four or more rivals. Monopoly hospitals also have contracts that load more risk on insurers (e.g., they have more cases with prices set as a share of their charges). In concentrated insurer markets the opposite occurs—hospitals have lower prices and bear more financial risk. Examining the 366 mergers and acquisitions that occurred between 2007 and 2011, we find that prices increased by over 6% when the merging hospitals were geographically close (e.g., 5 miles or less apart), but not when the hospitals were geographically distant (e.g., over 25 miles apart).