key: cord-0987915-8xmyv3hy
authors: Mohammed Kasim, Chakkungal; Azad, Parambengal; Muhammed Refeque, Eanthen; Maya, Kizhayoor
title: Effectiveness of public policy in reviving the COVID‐19 hit economy: Evidences from Kerala, India
date: 2021-11-18
journal: J Public Aff
DOI: 10.1002/pa.2794
sha: 9401b44b35c060ad39b02b02914598a8dd1c3338
doc_id: 987915
cord_uid: 8xmyv3hy

The economic crisis triggered by the COVID‐19 urgently required active policy interventions to enhance the revival strategies of the world economy. This paper examines the effectiveness of policy intervention of the State Government of Kerala in India in mitigating the risks caused by the pandemic. The policy effectiveness is evaluated by analyzing the data collected from a sample of 300 beneficiaries with the help of descriptive statistics, ordered probit (OP) model, and semi nonparametric extended OP (SNEOP) model. Our results are assertive with the fact that state policies are effective in reviving the crisis‐hit economy as they have primarily helped low‐income groups and other marginalized communities. The majority of BPL families, self‐help group members, and social security beneficiaries rated government policies as highly or fairly effective. Though the policies are found to be highly effective among those who have suffered income loss, the study does not find sufficient evidence to believe that the government interventions are effective in helping those who have lost their jobs. The level of effectiveness is inversely related to age, education, and family size. Our results suggest that an extensive fiscal package is required to help people recover from the crisis.

The economic crisis triggered by the COVID-19 urgently required active policy interventions to enhance the revival strategies of the world economy. This paper examines the effectiveness of policy intervention of the State Government of Kerala in India in mitigating the risks caused by the pandemic. The policy effectiveness is evaluated by analyzing the data collected from a sample of 300 beneficiaries with the help of descriptive statistics, ordered probit (OP) model, and semi nonparametric extended OP (SNEOP) model. Our results are assertive with the fact that state policies are effective in reviving the crisis-hit economy as they have primarily helped low-income groups and other marginalized communities. The majority of BPL families, self-help group members, and social security beneficiaries rated government policies as highly or fairly effective. Though the policies are found to be highly effective among those who have suffered income loss, the study does not find sufficient evidence to believe that the government interventions are effective in helping those who have lost their jobs. The level of effectiveness is inversely related to age, education, and family size. Our results suggest that an extensive fiscal package is required to help people recover from the crisis.

COVID-19, effectiveness, Kerala, ordered probit and semi nonparametric extended OP models, public policy 1 | INTRODUCTION John Maynard Keynes's advocacy for government intervention through public policies was a revolutionary chapter in economic thinking as it overturned the then-prevailing idea that free markets would automatically bring about economic stability. Historically speaking, when the great depression wrecked the world economy in an unparalleled way, fiscal policies, as proposed by Keynes, were effectively put in place to revive the economies. This was followed by a surge in discussions by Keynesian economists who argue that government intervention is necessary to stabilize the booms and busts in the economic activities (Aspromourgos, 2012; Jahan and Mahmud, 2014) . Thus, government intervention started to be seen as an integral element of revival mechanisms for the economies plunged into crisis.

The world today is on yet another battlefield fighting and resultant economic crises of various sorts. Beginning from 24 March, 2020 India witnessed a nationwide lockdown for 68 days till the end of May, which ultimately caused an unprecedented economic crisis. The pandemic has already affected the lives and livelihoods of millions of people by causing them to lose their jobs, income, and welfare.

Considering the magnitude of the shocks triggered by this pandemic and consequent closure measures, especially in the labor market, some studies prove that job losses ensuing COVID-19 are larger than the entire effects of the Great Recession (Montenovo, 2020; Coibion et al., 2020) .

In such a precarious state, effective execution of policies and interventions from the part of governments is inevitable. Realizing this, governments around the globe are bent on formulating various initiatives to get the economies out of chaos.

Government of Kerala had disbursed 7 months' welfare pension to 44 lakh households in one go. Further, another group of 14.7 lakh BPL families who are not eligible for welfare pensions were provided a relief of Rs. 1000. A sum of Rs. 1000 per person was distributed to the informal workers who have registered with the various welfare fund boards. An amount of Rs. 2000 crore has been allocated by the government in the economic package to provide loans to self-help group (SHG) members. Further, the state government distributed 15 kg of free food grains to all families irrespective of the type of ration card through the public distribution system during the lockdown. Free food grains were also distributed to the families not possessing ration cards. Further, the state government distributed free food kits containing 17 essential items through the public distribution system every month since the lockdown to all ration cardholders. In this paper, we analyze the effectiveness of these policy initiatives adopted by the Government of Kerala to help the people mitigate the risks associated with the pandemic.

The study uses Kerala as the reference state as Kerala is considered to be the "ground zero" of COVID-19 in India (Sarkar, 2021) .

Being one of the very first states in India to report COVID-19 cases, Kerala has grabbed the attention of international organizations and media commenting on the laudable efforts of the state to arrest COVID-19 induced setbacks (Andrews et al., 2020; Vaman et al., 2020) . Though there were criticisms from various corners regarding the state's failure to prevent the spread of the virus at some point in time, various initiatives of the state were generally taken as the ideal practices (Sadanandan, 2020) . Apart from this, Kerala has a reputed health system (Travelli, 2020; Isaac & Sadanandan, 2020) nurtured by successive governments, high levels of educational attainment, and the functioning of an effectively integrated local governments. All these have made the people politically vigilant which in turn forces the governments to implement pro-public programmes and initiatives. Thus, this study analyses the responses of randomly selected 300 sample beneficiaries about the effectiveness of state intervention in reviving from the COVID-19 crisis.

Keynes's general theory helped the world move out of the great depression and unsurprisingly it still gains adherents during economic crises. Similar to Keynes, Kalecki (1943) also emphasized the importance of government investment, subsidies for mass consumption, and various forms of family allowances in generating employment and consumption. Kalecki was of the view that that involuntary unemployment is the result of the absence of government intervention (Ghosh, 2005) . This asserts that the government has a huge role to play in stabilizing the economy. The discussions of government policies and interventions become contemporarily relevant as the world today is plunged into a crisis brought about by the COVID-19 pandemic. Various studies carried out to analyze the impacts of COVID-19 on the economy show that the pandemic has gruesomely resulted in job loss (Crayne, 2020; Coibion et al., 2020; Borjas et al., 2020; Lemieux, 2020; Costa Dias et al., 2020; Mayhew & Anand, 2020; Bell & Blanchflower, 2020) , income loss (Brewer & Gardiner, 2020; Dahab et al., 2020; Qian & Fan, 2020) and happiness loss (Greyling et al., 2020; VanderWeele et al., 2021; Yang & Ma, 2020) . As a result, countries all over the world have been trying all the way possible to save their economies from the shocks triggered by the pandemic.

Right from the beginning, the Kerala government has been vigilant and highly responsive to the outbreak of Covid-19 (Sadanandan, 2020) . The government has resorted to various initiatives such as tracking and tracing, providing medical and financial supports, ensuring food security, and supplying necessary food items (Sarkar, 2021) . The government initiatives were broadly aimed at curbing the spread of the virus and supporting the people whose lives were affected by the pandemic through multiple channels. There are few studies already conducted discussing Kerala's response to , and the majority of such studies are assertive of the fact that Kerala stands out in the world (Travelli, 2020; Falerio, 2020; Isaac & Sadanandan, 2020; Menon et al., 2020) in terms of dealing with the pandemic. However, this paper adds to the existing literature as it comprehensively analyses the effectiveness of Kerala's policy responses to support the people whose lives are badly affected by the pandemic.

3 | DATA AND METHODOLOGY

India, similar to many other countries, has so far witnessed an India, Kerala is one of the highly affected states. In order to support the people to come out of the crisis, Kerala has implemented various programs and schemes. Thus, the present study aims at analyzing the effectiveness of policy responses of the Kerala government adopted to mitigate the risks triggered by the pandemic. The effectiveness is analyzed based on the responses of a sample of 300 respondents selected from five districts of northern Kerala.

Northern Kerala consists of Kasaragod, Kannur, Wayanad, Kozhikode, and Malappuram districts. Applying the nonlist-based random sampling method, we have selected a sample of 60 respondents from each district. We could not collect data directly from sample respondents due to the constraints imposed by the COVID-19 protocol.

However, a well-structured digital questionnaire is prepared in google form and shared with the sample respondents through various digital social networks. The questionnaire was prepared in regional language and clear and elaborate instructions were given about the purpose of the study, target respondents, and each question to avoid mistakes from the part of respondents. The target respondents were household heads who are economically active. 

The Dependent variable used in the study is the rating recorded by where 1 = not effective, 2 = fairly effective, and 3 = Very effective.

As the dependent variable of the study is ordinal, the present study used ordered probit (OP) model and its extended version semi nonparametric extended OP (SNEOP) model proposed by Stewart (2004) .

Indexing individuals by the subscript i, the model can be written as: where y i * is individual i's response and the βs are the associated linear regression coefficients; X ki represents k independent variables and U i s are mutually independent standard normal variables. The OP model yields maximum likelihood estimates of the parameters of the response function given in Equation (1).

y i à is related to the observable ordinal variable of y i as follows:

where θ stands for the threshold value of the dependent variable at which the outcome changes.

The variable y i thus indicates in what interval y falls into. Thus, the probability of outcome j{1,2,3} is.

Pr

The consistency of the estimates of β, however, depends crucially on the assumed distribution of U i s. To avoid this distributional assumption, Stewart's (2004) SNEOP model is used. This model has several advantages over OP. Firstly, it relaxes the distributional assumption required by OP; instead, F(.) is estimated by maximum likelihood from a semi-nonparametric cumulative distributions whose density function is the product of the square of an unknown polynomial multiplied by the normal density, so that:

In Equation (2), K is the order of the unknown polynomial and ɸ(z) is the standard normal density at z. After choosing K based on simple likelihood-ratio tests and setting θ 1 to its OP value for identification, the coefficients γ k are estimated jointly with θ 2 and β by maximum likelihood. This flexible approach can take any distribution provided it is smooth enough and its tails are not too flat. Second, SNEOP nests the OP model, which corresponds to both K = 1 and K = 2. Prior to estimating the models, the study diagnosed the multicollinearity problem and confirmed that corresponding collinearity is not too high. After estimating a standard OP model, the study tests the underlying distributional assumption by computing Stewart's (2004) likelihood ratio tests on the value of K in SNEOP.

The study has also derived marginal effects of being not effective, An analysis of rating of government policies by the sample respondents revealed that the majority of the people (50.7%) are finding the government policies 'fairly effective.' While 22.7% of the respondents feel the policies as 'very effective,' 26.7% of the people feel as 'not effective,' (see Figure 1) . Table 2 presents a bivariate analysis of the responses across scale variables. Results show that the average age of those who find the policies 'effective' is lower, which implies that young people are relatively more satisfied with public policies. In the case of income, the mean income of the respondents is higher among those who find the policies 'very effective.' However, family size is higher among those who rate the government initiatives as 'not effective,' which suggests that large families are less satisfied. Table 5 .

An analysis of the responses of the people based on age, education and family size indicates that these factors have a negative impact on the level of satisfaction with government schemes. With the increase in age, level of education, and family size, the level of satisfaction with government interventions during the crisis period appears to be lower. This indicates that the expectations of the educated individuals and of old people exceed the government initiatives.

The negative association between the satisfaction and the government responses among the large families must be due to the inability to meet the requirements of entire family members during the crisis. Fiscal policies of the state government have immediately helped lowincome groups and other marginalized communities. The public policies have compensated for the income losses suffered by poor sections through both cash and in-kind transfers. BPL families and those who are entitled to social security benefits have found the policies to be highly effective. The workers who suffered income loss also found public policies very effective. This, as previously argued by Kalecki (1943) , highlights the importance of government spending and initiatives in boosting the economy. However, it is worth mentioning that the government interventions are not found to be that effective in helping those who have lost their jobs due to the pandemic. Therefore, in order to support all those who are affected by job loss and income loss, an extensive fiscal package that focuses more on employment generation is needed.

Author elects to not share data. 

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