Open AccessThe coronavirus: Black swan and endowment shock
Author(s) -
Guillermo Peña Blasco
Publication year - 2021
Publication title -
revista galega de economía
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.159
H-Index - 6
eISSN - 2255-5951
pISSN - 1132-2799
DOI - 10.15304/rge.30.1.7259
Subject(s) - economics , externality , shock (circulatory) , redistribution (election) , endowment , economic inequality , tax rate , public sector , capital (architecture) , inequality , monetary economics , labour economics , economy , microeconomics , medicine , mathematical analysis , philosophy , mathematics , archaeology , epistemology , politics , political science , law , history
An external shock caused by an extraordinary and unpredictable effect, a “black swan” like COVID-19, is analyzed. It implies a shift of endowment in financial markets, and its effects on economic inequality, financial deepening and total economic income. Theoretical models are proposed, where the public sector seeks alternatives to a lockdown, allowing self-regulation of the economy, taxing capital or seeking joint policies with other states. In the first model, the economy is self-regulating with the help of the financial sector. Nonetheless, inequality is generated and in other models, the public sector tries to intervene. First, the public sector minimizes inequality by taxing capital, allowing a redistribution of wealth and income, with a tax rate that depends only on the differential impacts of the black swan on the different markets. Finally, a coordination of policies between the different countries affected is proposed to prevent black swans and other negative externalities. This is feasible depending on the tax rate, household benefits and administration costs