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A General Equilibrium of COVID-19 and Environmental Economy

Author

Listed:
  • Jai-Young Choi
  • Eden Yu

Abstract

This article investigates the economic implications of coronavirus disease 2019 (COVID-19) pandemic in the 2×3 Heckscher-Ohlin model of general equilibrium by integrating the interactive relationships among COVID-19 pandemic, environment and the economy. We consider the environment (a) as a by-product of COVID-19 pandemic, (b) as a public input used for production of goods and services and (c) as a public good directly affecting social utility. A crucial feature of the model is the short-run versus the log-run environmental effects of COVID-19. It is shown that the signs of the environmental response to COVID-19, relative magnitudes of the sectoral environment-output responses and the sectoral factor intensities jointly determine the effects of COVID-19 on factor prices, sectoral outputs and employment and stability of the environmental economy. We show while COVID-19 is bad for society in the short-run; however, in the long-run COVID-19 may be welfare-improving under certain conditions regarding the response of the environment to the human remedial measures. Furthermore, for an environmental economy to be dynamically stable, the net environmental effect of COVID-19 should move in the positive direction; specifically, if the environment is at equilibrium (disequilibrium), the optimum optimorum is free trade policy together with lump-sum income tax used to subsidise the production of counteractive pandemic measures. JEL Codes: F51, F11, I18, Q50

Suggested Citation

  • Jai-Young Choi & Eden Yu, 2025. "A General Equilibrium of COVID-19 and Environmental Economy," Foreign Trade Review, , vol. 60(2), pages 173-189, May.
    • Handle: RePEc:sae:fortra:v:60:y:2025:i:2:p:173-189
    DOI: 10.1177/00157325241272313
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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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