How Institutions Moderated the Pandemic's Economic Impact in EU Member States

We investigate how institutional quality affected the economic downturn in EU countries during the COVID-19 pandemic. Using quarterly time-series cross-sectional data, we show that there was a robust positive and significant relationship - countries with higher quality of governance and higher scores of economic freedom suffered markedly less. Importantly, institutions mattered more when the pandemic hit most forcefully. Thus, the pandemic highlights the asymmetric impact of seemingly symmetric exogenous shocks on EU economies and raises important issues about the necessary reforms for short-run resilience and long-run convergence.