The economic impacts of traffic consumption during the COVID-19 pandemic in China: A CGE analysis

Abstract

The transportation sector has played an important role during the COVID-19 pandemic. Like many industries, it experienced a sharp decline during the pandemic. The reduced traffic consumption has been caused by objective conditions, such as traffic control measures, and subjective factors, such as the perception of the COVID-19 pandemic. This study uses the computable general equilibrium (CGE) model to examine the economic impacts of traffic consumption during the COVID-19 pandemic in China. Moreover, to evaluate the impact of the government's economic stimulus policy related to transportation, this study examines the policy effects of transportation investment. This study suggests that, first, China's macroeconomy has been severely affected by reduced traffic consumption. The period when the pandemic was most severe had the largest GDP decrease (0.49%). Second, transportation consumption is closely associated with the output of all industries. As the pandemic worsens, the output of all sectors declines more. Of the transport sectors, road transport has the largest output decrease (10.17%), followed by railway (1.76%) and air sectors (1.53%). The service industry is the most negatively affected among the non-transportation sectors. Finally, transportation infrastructure investment can effectively promote the economy and create jobs. In addition, railway investment plays a more positive role in the economy than road and air transports. The findings provide a detailed understanding of the economic impact of the significantly reduced traffic consumption at different stages of the pandemic.

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