The cost of lockdown, and the cost of not doing it
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Evidence from the United States
The best evidence to date on this matter comes froma remarkable papercirculated in June by University of Chicago economists Austan Goolsbee and Chad Syverson.
To analyse the causal effect of government policy on the US economy during the initial spread of COVID-19, they used mobile phone data to measure foot traffic at 2.25 million individual businesses across 110 industries in the US.
To estimate what proportion of lower foot traffic was due to self-lockdown rather than government-imposed lockdown, they looked at differences between businesses with customer “commuting zones” spanning state or county jurisdictions with different legal restrictions.
As they put it:
This leverages two related types of variation: businesses in border-spanning commuting zones where jurisdictions impose shelter-in-place orders at different times (e.g., northern Illinois when Illinois placed a sheltering order on March 20th while Wisconsin waited until the following week), and businesses in commuting zones where a jurisdiction never imposed an order (e.g., the Quad Cities area, where the Illinois towns of Moline and Rock Island faced stay-at-home orders but bordering Davenport and Bettendorf, Iowa, did not).
Goolsbee and Syverson found total consumer traffic fell by 60 percentage points, but legal restrictions accounted for just 7 percentage points of this. That is, it caused less than 12% of the total effect.
Breaking down the data further, they show fear of infection largely drove individual decisions to reduce activity.
In fact, foot traffic “started dropping before the legal orders were in place; was highly influenced by the number of COVID deaths reported in the county; and showed a clear shift by consumers away from busier, more crowded stores toward smaller, less busy stores in the same industry”.
Strikingly, US states that decided to repeal shutdown orders witnessed recoveries of a similar, symmetric size. This is further evidence of the modest incremental impact of lockdowns relative to the larger impact of the virus itself.
