Stay-at-Home Orders in a Fiscal Union

Mario Crucini () and Oscar O'Flaherty

No 28182, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E3 E47 E62 H12 H23 H7 (search for similar items in EconPapers)
Date: 2020-12
New Economics Papers: this item is included in nep-lma, nep-mac and nep-ure
Note: EFG EH IFM PE
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Citations: View citations in EconPapers (9)

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Working Paper: Stay-at-home orders in a fiscal union (2021)
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