This paper analyzes equilibrium social distancing behavior when pharmaceutical innovations, such as effective vaccines and treatments, are anticipated to arrive. Once such innovations arrive, costly social distancing can be reduced. We characterize how the anticipation of such innovations influences pre-innovation social distancing. When vaccines are anticipated, equilibrium social distancing is ramped up as the arrival date approaches to increase the probability of reaching the post-innovation phase in the susceptible state. In contrast, under anticipated treatment, equilibrium social distancing is phased out by the time of arrival. We compare the equilibrium paths with the socially optimal counterparts and discuss policy implications.
Makris, M and F Toxvaerd (2020), ‘Great expectations: Social distancing in anticipation of pharmaceutical innovations‘, COVID Economics 56, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-56#392514_392932_390659
We hand-collect a time-series database of business closures and related restrictions for every county in the United States since March 2020. We then relate these policies to future growth in deaths due to Covid-19. To our knowledge, ours is the most comprehensive database of U.S. Covid-19 business policies that has been assembled to date. Across specifications, stay-at-home orders, mandatory mask requirements, beach and park closures, restaurant closures, and high risk (Level 2) business closures are the policies that most consistently predict lower 4- to 6- week-ahead fatality growth. Â For example, baseline estimates imply that a county with a mandatory mask policy in place today will experience 4- week and 6- week ahead fatality growth rates that are each 1% lower (respectively) than a county without such an order in place. Â This relationship is significant, both statistically and in magnitude. Â It represents 12% of the sample mean of weekly fatality growth. Â The baseline estimates for stay-at-home, restaurant and high-risk business closures are similar in magnitude to what we find for mandatory mask policies. Â We fail to find consistent evidence in support of the hypothesis that some of the other business restrictions (such as spa closures, school closures, and the closing of the low- to medium- risk businesses that are typically allowed in Phase I reopenings) predict reduced fatality growth at four-to-six- week horizons. Â Some policies, such as Â low- to medium- business risk closures may even be counterproductive. Â To address potential endogeneity concerns, we conduct two tests. Â First, we exploit the fact that many county regulations are imposed at the state-level through Governorsâ€™ executive orders. Â Following the intuition that smaller counties often inherit state-level regulations that are intended to reduce transmission and deaths in more populous regions, we remove the 5 most populous counties in each state from the sample. Â In the second test, we match counties that lie near (but not on) state borders to counties in different states that are also near (but not on) state borders and are within 100 miles of that county. Â Absent policy differences, these nearby counties should see similar trends in virus transmission; making them good controls. Â We continue to find that stay-at-home, mandatory masks, beach and park closures, restaurant closures, and high risk business closures all predict declines in future fatality growth.
Spiegel, M and H Tookes (2020), ‘Business Restrictions and Covid Fatalities‘, COVID Economics 56, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-56#392514_392932_390660
Using transaction data from 2 million customers of ABN AMRO bank, this paper distinguishes the economic effects of voluntary responses to Covid-19 from those attributable to government lockdown measures. We compare municipalities that experienced large Covid-19 outbreaks with municipalities that had few or no cases, and ?nd that the scale of the outbreak in a municipality has a strong negative effect on physical transactions by consumers, including for sectors that were allowed to stay open during the lockdown. We show that these responses are correlated with the intensity of the local outbreak rather than provoked by general perceptions of the outbreak. Our findings imply that the reaction function of the consumer stimulates self-isolation, which has a negative economic impact at the local level. Therefore, one potential path for long-term economic recovery is to diminish the effect of fear and restore consumer confidence by addressing the spread of the virus itself.
Golec, P, G Kapetanios, N Neuteboom, F Ritsema and A Ventouri (2020), ‘Disentangling the effect of government restrictions and consumers’ reaction function to the Covid-19 pandemic‘, COVID Economics 56, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-56#392514_392932_390813
Are COVID-19 fatalities large when a federal government does not impose containment policies and instead allow states to implement their own policies? We answer this question by developing a stochastic extension of a SIRD epidemiological model for a country composed of multiple states. Our model allows for interstate mobility. We consider three policies: mask mandates, stay-at-home orders, and interstate travel bans. We fit our model to daily U.S. state-level COVID-19 death counts and exploit our estimates to produce various policy counterfactuals. While the restrictions imposed by some states inhibited a significant number of virus deaths, we find that more than two-thirds of U.S. COVID-19 deaths could have been prevented by late September 2020 had the federal government imposed federal mandates as early as some of the earliest states did. Our results highlight the need for early actions by a federal government for the successful containment of a pandemic.
Renne, J, G Roussellet and G Schwenkler (2020), ‘Preventing COVID-19 Fatalities: State versus Federal Policies‘, COVID Economics 56, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-56#392514_392932_390661
To prevent the spread of COVID-19, many cities, states, and countries have `locked down', restricting economic activities in non-essential sectors. Such lockdowns have substantially shrunk production in most countries. This study examines how the economic effects of lockdowns in different regions interact through supply chains, a network of firms for production, simulating an agent-based model of production on supply-chain data for 1.6 million firms in Japan. We further investigate how the complex network structure affects the interactions of lockdowns, emphasising the role of upstreamness and loops by decomposing supply-chain flows into potential and circular flow components. We find that a region's upstreamness, intensity of loops, and supplier substitutability in supply chains with other regions largely determine the economic effect of the lockdown in the region. In particular, when a region lifts its lockdown, its economic recovery substantially varies depending on whether it lifts lockdown alone or together with another region closely linked through supply chains. These results propose the need for inter-region policy coordination to reduce the economic loss from lockdowns.
Inoue, H, Y Murase and Y Todo (2020), ‘The impact of supply-chain networks on interactions between the anti-COVID-19 lockdowns in different regions‘, COVID Economics 56, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-56#392514_392932_390662
The COVID-19 pandemic has posed major challenges, of which food insecurity is one, to countries across the world. A number of policies have been put in place in response to the development of the outbreak. In this paper, I investigate the impacts of one of these policies, the reopening of the economy, on food security. Using a recent large-scale household survey in the United States, I find that food insecurity is a major problem that could adversely affect peopleâ€™s health. Using a report on containment policy across states in the United States to construct the level of this policy, I also find that this policy reduced the likelihood of food insecurity. While the overall impact of this policy is expected, how it influenced the causes of food security is more interesting. In particular, while it helped to increase the availability of food to the people in need, it decreased their ability to buy food. Not only reopening policy increased the expenses on food, which made food less affordable, it also had adverse effect on peopleâ€™s health which prevented them from going out to buy food. I also show how effective the multiple food programs were in the presence of reopening policy. These findings provide valuable evidence to policy makers in mitigating the impacts of the COVID-19 crisis.
Luong, T (2020), ‘Reopening the economy and food security‘, COVID Economics 56, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-56#392514_392932_390663