The Cost of Staying Open: Voluntary Social Distancing and Lockdowns in the US
David Van Dijcke and
No 910, Economics Series Working Papers from University of Oxford, Department of Economics
In combating the spread of COVID-19, some governments have been reluctant to adopt lockdown policies due to their perceived economic costs. Such costs can, however, arise even in the absence of restrictive policies, if individualsâ€™ independent reaction to the virus slows down the economy. This paper ï¬ nds that imposing lockdowns leads to lower overall costs to the economy than staying open. We combine detailed location trace data from 40 million mobile devices with diï¬€erence-in-diï¬€erences estimations and a modiï¬ cation of the epidemiological SIR model that allows for societal and political response to the virus. In that way, we show that voluntary reaction incurs substantial economic costs, while the additional economic costs arising from lockdown policies are small compared to their large beneï¬ ts in terms of reduced medical costs. Our results hold for practically all realistic estimates of lockdown eï¬ƒciency and voluntary response strength. We quantify the counterfactual costs of voluntary social distancing for various US states that implemented lockdowns. For the US as a whole, we estimate that lockdowns reduce the costs of the pandemic by 1.7% of annual GDP per capita, compared to purely voluntary responses. Revised September 2020
Keywords: COVID-19; diï¬€erence-in-diï¬€erences; SIR model; social distancing; lockdown; big data (search for similar items in EconPapers)
JEL-codes: I12 I18 H12 D04 C33 H51 (search for similar items in EconPapers)
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