The Cost of Staying Open: Voluntary Social Distancing and Lockdowns in the US

Brzezinski, Adam, Kecht, Valentin, and Van Dijcke, David (2020). "The Cost of Staying Open: Voluntary Social Distancing and Lockdowns in the US." Economics Series Working Papers 910, University of Oxford, Department of Economics.

38 Pages Posted: 31 May 2020 Last revised: 26 Oct 2020

See all articles by Adam Brzezinski

Adam Brzezinski

University of Oxford

Valentin Kecht

Bocconi University

David Van Dijcke

University of Michigan, Ann Arbor

Date Written: May 30, 2020

Abstract

In combating the spread of COVID-19, some governments have been reluctant to adopt lockdown policies due to their perceived economic costs. Such costs can, however, arise even in the absence of restrictive policies, if individuals’ independent reaction to the virus slows down the economy. This paper finds that imposing lockdowns leads to lower overall costs to the economy than staying open. We combine detailed location trace data from 40 million mobile devices with difference-in-differences estimations and a modification of the epidemiological SIR model that allows for societal and political response to the virus. In that way, we show that voluntary reaction incurs substantial economic costs, while the additional economic costs arising from lockdown policies are small compared to their large benefits in terms of reduced medical costs. Our results hold for practically all realistic estimates of lockdown efficiency and voluntary response strength. We quantify the counterfactual costs of voluntary social distancing for various US states that implemented lockdowns. For the US average, we estimate that lockdowns reduce the costs of the pandemic by 0.8% of annual GDP per capita, compared to purely voluntary responses.

Keywords: COVID-19, difference-in-differences, SIR model, social distancing, lockdown, big data

JEL Classification: I12, I18, H12, D04, C33, H51

Suggested Citation

Brzezinski, Adam and Kecht, Valentin and Van Dijcke, David, The Cost of Staying Open: Voluntary Social Distancing and Lockdowns in the US (May 30, 2020). Brzezinski, Adam, Kecht, Valentin, and Van Dijcke, David (2020). "The Cost of Staying Open: Voluntary Social Distancing and Lockdowns in the US." Economics Series Working Papers 910, University of Oxford, Department of Economics., Available at SSRN: https://ssrn.com/abstract=3614494 or http://dx.doi.org/10.2139/ssrn.3614494

Adam Brzezinski

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Valentin Kecht

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

David Van Dijcke (Contact Author)

University of Michigan, Ann Arbor ( email )

2350 Hayward Street
Ann Arbor, MI 48109
United States

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