Abstract
US states have implemented lockdown measures to contain the COVID-19 pandemic. We assess the impact of state policy responses on local economic and health conditions, with the goal to shed light on marginal health benefits and economic costs associated with social distancing. We find that lockdown measures are effective in alleviating disease severity, but yield significant contraction of the economy. Deteriorating health conditions are disruptive to the labor supply, financial health, and economic output. The adverse economic impact of lockdowns exceeds the economic damage brought by the disease itself, but health conditions better forecast economic contraction outcomes.
Highlights
The world is confronting a joint health and economic crisis of unprecedented severity.On 11 March 2020, the World Health Organization (WHO) declared the highly infectious coronavirus disease (COVID-19) to be a pandemic
Did policy actions to contain the spread of the COVID-19 disease save and sustain lives? Did such mitigation interventions have detrimental effects on the economic conditions of an average citizen and firm? these questions are the focus of attention for communities, public health experts, and policymakers, to our knowledge, there is no academic research directly linking the joint impact of public-health measures and disease severity to various local economic and health outcomes
With respect to the relative severity of the disease and social policy outcomes, we show that disease fatalities have a more notable negative economic impact compared to disease cases, but the economic impact of health conditions is relatively smaller than the economic effects of state policy measures
Summary
The world is confronting a joint health and economic crisis of unprecedented severity. A machine learning assessment of the relative strength of coronavirus disease severity and state policy measures to predict real local economic contraction outcomes indicates that the disease itself has more predictive utility relative to mandatory social distancing policy measures undertaken by the states to slow down the spread of the disease. An overview of the determinants of the state policy actions undertaken to mitigate the spread of the disease and its severity suggests that states with higher death incidences have imposed stricter restrictions broadly and stay home orders, business closures, and primary election postponement more narrowly. Among the social distancing measures, state restrictions, stay home orders, business closures, and gathering bans are identified to be the only effective mitigating interventions that helped slow down disease cases. Our analyses enabled systemic cross-state comparisons of government interventions and their economic and health impact
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