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The Human-Capital Costs of the Crisis

Summary:
Unlike a hurricane or earthquake, the coronavirus pandemic has caused no damage to physical capital stock. But firm-specific skills have no value when the firm that uses them goes out of business, which is one reason why US productivity, wages, and economic growth are likely to be affected for years to come. BERKELEY – US President Donald Trump tells us that once COVID-19 is contained and it is safe to go back to work, the economy will be “great again.” Is he right? Witnessing Wuhan PS OnPoint Xinhua/Xiao Yijiu via Getty Images Free to read The Trump

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Unlike a hurricane or earthquake, the coronavirus pandemic has caused no damage to physical capital stock. But firm-specific skills have no value when the firm that uses them goes out of business, which is one reason why US productivity, wages, and economic growth are likely to be affected for years to come.

BERKELEY – US President Donald Trump tells us that once COVID-19 is contained and it is safe to go back to work, the economy will be “great again.” Is he right?

There is at least one reason to think he is. After all, unlike a hurricane or earthquake, the pandemic has caused no damage to the physical capital stock. It follows, Trump and his advisers argue, that we can pick up where we left off....

Barry Eichengreen
Barry Eichengreen is Professor of Economics at the University of California, Berkeley; Pitt Professor of American History and Institutions at the University of Cambridge; and a former senior policy adviser at the International Monetary Fund.

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