Stay-at-home orders in a fiscal union

Mario Crucini () and Oscar O'Flaherty

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: State and local governments throughout the United States attempted to mitigate the spread of Covid-19 using stay-at-home orders to limit social interactions and mobility. We study the economic impact of these orders and their optimal implementation in a fiscal union. Using an event study framework, we find that stay-at-home orders caused a 4 percentage point decrease in consumer spending and hours worked. These estimates suggest a $10 billion decrease in spending and $15 billion in lost earnings. We then develop an economic SIR model with multiple locations to study the optimal implementation of stay-at-home orders. From a national welfare perspective, the model suggests that it is optimal for locations with higher infection rates to set stricter mitigation policies. This occurs as a common, national policy is too restrictive for the economies of mildly infected areas and causes greater declines in consumption and hours worked than are optimal.

Keywords: COVID-19; infection rates; state orders; treatment effect (search for similar items in EconPapers)
Pages: 67 pages
Date: 2021-04
New Economics Papers: this item is included in nep-ure
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https://cama.crawford.anu.edu.au/sites/default/fil ... rucini_oflaherty.pdf (application/pdf)

Related works:
Working Paper: Stay-at-Home Orders in a Fiscal Union (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2021-39

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