Containing the spread of the coronavirus has come at a staggering price. Despite unprecedented monetary and fiscal support from governments, the World Bank predicts global economic output will dive 5 percent in 2020 and per-capita income will shrink in the largest percentage of countries since 1870. Now a new wave of COVID-19 cases in the United States is threatening countrywide reopening plans and pressuring policy makers to impose fresh lockdowns—at risk of deepening the downturn.
Yet, research from Chicago Booth’s Austan D. Goolsbee and Chad Syverson suggests that US government restrictions had only a mildly chilling effect on the economy. They argue that commercial activity had already begun to collapse before late March and early April, when many jurisdictions imposed shutdowns. In that case, government lockdowns didn’t crash the economy—fear of the virus did.
Using foot-traffic data at 2.2 million businesses, the researchers compared consumer behavior across similar stores located in the same metro area but across counties where shelter-in-place orders were issued at different times. Those timing differences allowed the researchers to measure the impacts of lockdowns.
While overall consumer traffic plunged by 60 percent during the crisis, official social-distancing restrictions accounted for only one-tenth of the drop, the researchers find. That is, traffic fell just about as much at stores in counties that hadn’t imposed shelter-in-place orders as at stores in counties in the same metros that did impose them. “Our results suggest that legal restrictions per se didn’t have a big effect on people’s choices to stay at home,” says Syverson. “That means the biggest thing driving the virus recession is the virus itself, or at least people’s fear of being infected by it.”
The researchers used data from SafeGraph, which compiles the number of visits to various business addresses using information drawn from nearly 45 million cell-phone users—about 10 percent of all devices in the US. The data set included businesses in 110 industry classifications where consumer visits are a plausible proxy for economic activity, such as restaurants and retail stores. While policy makers often rely on state-level data, the researchers dug down to the county level to capture consumer behavior in nearby metros that imposed restrictions at different times—or, in the case of eight states, none at all.