The Social Cost of the COVID-19 Pandemic in Israel during 2020-2021

Author(s): Amir Shmueli, Osnat Peled, Ella Shachar

Background: The Covid-19 pandemic hit Israel in February 2020. In response to the pandemic, the government has imposed preventive measures to reduce the spreading of the virus, including lockdowns and restrictions that have severely undermined the normal course of life.

Methods: The social cost of the Covid-19 pandemic in 2020-2021 is the sum of the direct and indirect costs and monetary values of the welfare loss that the pandemic has caused in various areas of life. We identified seven life/cost domains as follows: loss of GDP, fiscal cost, labor market, health, education, domestic violence and transportation. The cost of the pandemic includes components measured in monetary values (such as loss of GDP or government expenditure) and components caused by welfare loss (such as mortality, deterioration of mental health, or obesity) expressed as years of life or quality adjusted life years (QALYs) lost. The monetary value of a lost year of life or QALY adopted in this work is, according to the recommendation of the World Health Organization, three times GDP per capita (NIS 466,311 in 2019). The impact of the pandemic in the various domains was calculated by comparing the actual situation in 2020-2021 to the situation that was expected before the pandemic.

Results: The total cost of the Covid pandemic in Israel in 2020-2021 amounted to about NIS 783 billion, or 55% of GDP in 2019. This cost amounts to an average cost of about NIS 292,000 per Israeli household. The area most severely affected is health (33% of GDP), and most of the cost was caused by the increase in anxiety and depression levels. The labor market returned to normal quite rapidly, so no long-term unemployment costs were identified.

Conclusions: It is likely that the cost we estimated is an underestimation. Since we have not been able to locate similar works done in other countries, we performed a comparison with OECD countries in terms of the negative impact on GDP, loss of years of life and loss of school days. It shows that Israel has done better than the OECD average.