Costs and Benefits of Closing Businesses in a Pandemic

Jean-Noel Barrot, Maxime Bonelli, Basile Grassi and Julien Sauvagnat
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Jean-Noel Barrot: HEC Paris
Maxime Bonelli: London Business School - Department of Finance

No 1374, HEC Research Papers Series from HEC Paris

Abstract: We study whether state-level mandatory business closures implemented in response to the outbreak of the Covid-19 causally affect economic and health outcomes. Using plausibly exogenous variations in exposure to these restrictions, we find that they impose substantial losses to firms and workers, the former bearing approximately two thirds of the cost, consistent with firms partially insuring their workers. We show that mandatory business closures have a significant negative causal effect on mortality rates, particularly in areas featuring contact-intensive occupations. We discuss the assumptions under which the health benefits of business closures exceed their associated economic costs.

Keywords: COVID-19; pandemic; business closures; non-essential businesses (search for similar items in EconPapers)
JEL-codes: E32 H10 I10 I18 (search for similar items in EconPapers)
Pages: 89 pages
Date: 2020-05-13
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1374

DOI: 10.2139/ssrn.3599482

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