Estimating the Costs and Benefits of Mandated Business Closures in a Pandemic

Jean-Noël Barrot, Basile Grassi and Julien Sauvagnat
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Jean-Noël Barrot: GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique

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Abstract: Typical government responses to pandemics involve social distancing measures designed to curb disease propagation. We evaluate the impact of state-mandated business closures in the context of the Covid-19 crisis in the US. Using state-level variations in the set of sectors forced to shut down, and within-state variations in local industry composition, we estimate the effects of business closures on infection and death rates. We find that locking down 10% of the labor force is associated with 0.017 and 0.0015 percentage points lower Covid-19 weekly infection and death rates. Business closures lead to significant declines in hours worked, and to large market value losses for affected firms. The findings translate into 29,000 saved lives for a cost of $169 billion.

Keywords: Business closures; Pandemic; Covid-19; Non-essential businesses (search for similar items in EconPapers)
Date: 2020-07-10
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Working Paper: Estimating the costs and benefits of mandated business closures in a pandemic (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-02896739

DOI: 10.2139/ssrn.3599482

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