Causal Effects of Closing Businesses in a Pandemic

66 Pages Posted: 13 May 2020 Last revised: 5 Jan 2022

See all articles by Jean-Noel Barrot

Jean-Noel Barrot

HEC Paris; HEC Paris

Maxime Bonelli

HEC Paris - Finance Department

Basile Grassi

Bocconi University - Department of Economics; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research; Centre for Economic Policy Research (CEPR)

Julien Sauvagnat

Bocconi University; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

Date Written: December 30, 2021

Abstract

We estimate the causal effects of state-level mandatory business closures implemented in response to the outbreak of the Covid-19. Using within-state variations in exposure to these restrictions, we find that they impose substantial losses to firms and workers, the former bearing 70% of the cost, consistent with firms partially insuring their workers. While mandatory business closures have a significant negative causal effect on mortality rates, we show that the implied cost-per-life-saved is higher than the value of a statistical life typically considered for policy design, and that it could have been lowered by more selectively targeting restrictions.

Keywords: COVID-19, pandemic, business closures, non-essential businesses

JEL Classification: E32, I10, I18, H1

Suggested Citation

Barrot, Jean-Noel and Barrot, Jean-Noel and Bonelli, Maxime and Grassi, Basile and Sauvagnat, Julien, Causal Effects of Closing Businesses in a Pandemic (December 30, 2021). Available at SSRN: https://ssrn.com/abstract=3599482 or http://dx.doi.org/10.2139/ssrn.3599482

Jean-Noel Barrot (Contact Author)

HEC Paris ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

HEC Paris ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

Maxime Bonelli

HEC Paris - Finance Department ( email )

France

Basile Grassi

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Julien Sauvagnat

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

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