COVID-19 in the global south: Economic impacts and recovery

As COVID-19 began to spread earlier this year, some of the earliest and strictest lockdown policies were imposed in the global south, a term that refers to refers broadly to the regions of Latin America, Asia, Africa and Oceania.

Those shelter-in-place orders had profound implications for the large majority of households in the global south that rely on wages from an informal economy. The United Nations World Food Program recently projected that more than a quarter of a billion people?? might suffer acute hunger by the end of the year.

On June 10, 2020, the Center for Effective Global Action (CEGA) hosted a Berkeley Conversations: COVID-19 live event, “COVID-19 in the global south: Economic Impacts and Recovery.

The online panel discussion explored the economic impacts and longer-term implications of the pandemic in low- and middle-income countries, along with insights that could help governments and non-governmental organizations protect individuals and households from falling deeper into poverty.

Economics professor Ted Miguel, faculty co-director at CEGA, shared the results of weekly phone surveys his research team is conducting in rural Western Kenya. The calls are some of the most rigorous evidence available in the region on the spread of COVID-19 and its economic fallout.

Since the start of the lockdowns in early April, he said, Kenyan households have reported 25% declines in household income and 29% declines in food? consumption.

As many as 56% of respondents said that their children must now skip meals. Meanwhile, rates of domestic violence have significantly increased, including violence against children, which has increased 49% since the start of the lockdown, he said.

Paul Niehaus, associate economics professor at UC San Diego, said that “COVID has turned the world of social protection on its head … the set of people who are now economically insecure and vulnerable is enormous and much bigger than is typical.”

One solution, the panelists? said, might be something like a universal basic income.

Through a randomized evaluation of nearly 200 villages in Western Kenya, Niehaus and his collaborators are exploring the effects of unconditional cash transfers on living standards, food security and mental and physical health.

The research group found large improvements in mental health for all cash transfer recipients, as well as a significant reduction in person-to-person interactions outside the household.

One explanation could be that people feel less compelled to risk their health and the health of their families to earn a daily wage. These findings suggested to the panelists that short-term cash transfers could help dampen the spread of COVID-19, in addition to mitigating its economic impacts.

What else should governments and NGOs consider when designing social protection programs in response to COVID-19?

Drawing on evidence from India and Zambia, Berkeley economics professor Supreet Kaur explained the importance of integrating insights from psychology into the design of social safety net programs.

Scare resources take a large cognitive toll on the poor, exacerbating the already limited capacity of a person in the global south to plan and save money, even under normal circumstances, she said.

“People right now are worried about their financial security,” she said. “This doesn’t just mean that they don’t have enough to eat or can’t afford to send their children to school — it is likely to change their psychological state, crowding out their capacity to focus on other things like decision-making, productivity, savings, health, parenting and more.”

Kaur presented research documenting that inexpensive psychological interventions, like simple financial planning tools, can have outsized impacts.

Finally, determining who is eligible for support remains a challenge in countries where reliable and up-to-date information about on-the-ground economic conditions is hard to come by, especially during a pandemic.

Berkeley computer science professor Josh Blumenstock, who is also faculty co-director at CEGA, discussed the potential of high-frequency data from mobile phones and satellite networks, combined with machine learning approaches, to rapidly identify households in the direst need
of help.

“These approaches, based on big data and machine learning, can provide missing and complementary information that, combined with traditional approaches, can help governments more effectively respond to the humanitarian crisis,” he said.

Berkeley Conversations: COVID-19 is a live, online series featuring faculty experts from across the Berkeley campus who are sharing what they know, and what they are learning, about the pandemic. All conversations are recorded and available for viewing at any time on the Berkeley Conversations website.