Global Evidence on the Economic Effects of Disease Suppression During COVID-19

Abstract

The disease burden of COVID-19 has been well documented around the world, but the economic cost has not. Consequently, no international studies analyze how the severity of the disease burden relates to job loss or other economic outcomes and only a handful have attempted to investigate how disease suppression policies (or non-pharmaceutical interventions) exacerbate or mitigate economic harm. Using data from 321,000 randomly selected adults around the world in 117 countries, we study reported job loss from COVID-19 and how it has affected people subjectively using harmonized, consistent metrics. We validate our measures by linking them to losses in subjective wellbeing on the survey and note their correlations with objective measures available for a limited number of countries. We sketch a theoretical model that relates economic production by industry to disease suppression restrictions and the capacity to work remotely. Testing our model, we find strong evidence that more stringent disease prevention measures increased the risk of economic harm: a one standard deviation change in policy, predicts a 0.3 standard deviation increase in harm. Countries with many deaths per capita, however, did not experience greater economic harm than those with few. These results remain robust to alternative measures of our key variables, including controls for the reduction in flu cases, and the use of within country variation over time in disease suppression policies and deaths. We replicate the findings for the United States using state-level variation in income loss from the U.S. Census Bureau. Disease-suppression policies that are not intended to dampen social contact—such as asymptomatic testing, contact tracing, mask mandates—are not associated with economic harm, whereas school closures and stay-at-home orders predict job loss and other forms of harm. We conclude that the policy responses to COVID-19 had important economic consequences, though our study makes no effort to measure the non-economic benefits of disease suppression.