Economic Costs of Distancing Policy Interventions

Olivér Rácz

Corvinus Economics Working Papers (CEWP) from Corvinus University of Budapest

Abstract: Distancing policy interventions (DPIs) were aimed at containing the COVID-19 pandemic, but they also likely affected economic activity. This paper estimates the effects of DPIs on selected indicators of monthly economic activity, such as industrial and manufacturing production, construction output, retail trade, inflation, and unemployment. The main contribution of this paper is the isolation of the causal effects of distancing interventions from the effects of voluntary distancing. I use mobility data as a measure of distancing to identify DPI effects on mobility in a regression discontinuity design, specifically as immediate changes in distancing right after the intervention. This strategy identifies the unobserved voluntary component of distancing as well, which is a key control variable in the identification of the economic effects of DPIs. I find significant output losses due to DPIs, but no evidence for inflationary or unemployment effects. Results also show that although voluntary distancing caused significant output losses, their effect was an order of magnitude smaller than that of DPIs.

Keywords: COVID-19; non-pharmaceutical interventions; causal identification; regression-discontinuity-in-time (search for similar items in EconPapers)
JEL-codes: C30 C33 C43 C54 E23 E24 E65 H10 H12 H30 H84 I10 I12 I18 (search for similar items in EconPapers)
Date: 2023-05-05
New Economics Papers: this item is included in nep-hea and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:cvh:coecwp:2023/04

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