Line of Inquiry: Chad Syverson on the Impact of Stay-at-Home Policies

What we were trying to figure out with this study is, we know that because of the COVID-19 pandemic, there was a big drop in economic activity, and at the same time, a lot of governments were imposing stay-at-home orders and shutdown orders on certain kinds of businesses. We were trying to figure out how much of that drop in economic activity was driven by those COVID-19-related shutdowns versus just people’s own voluntarily cautious behavior—staying home for fear of contracting COVID-19 themselves. We were trying to figure out quantitatively how important each one of those things was in determining how large the drop in economic activity was.

Our primary data here was cell-phone location data. And what we had essentially was a counter on the door of any one of about 2.5 million businesses. So we could count the number of people who were coming through the door every week. We didn’t see anything about the individuals themselves; we just knew how many people came into each business. And that’s what we tracked over time and we related that to the presence or absence of local policies about stay-at-home orders and shutdowns and things like that.

For example, in the Quad Cities, in Illinois and in Iowa, the Illinois side at some point became subject to a stay-at-home order. The Iowa side never was. So we compared two similar businesses, say two barbershops, one on the Rock Island side, one in Bettendorf on the Iowa side, and we looked at how traffic fell at both of those barbershops over time and then related that. And what we found was that traffic fell a lot in both places, not just on the Illinois side where there was a shutdown order, but also on the Iowa side. Now, it fell a little bit more on the Illinois side, and that’s the effect of the shutdown order.

In total, we found on average about a 60 percent decline in the amount of traffic at businesses in our data, about 7 percentage points of which was from the shutdown orders themselves. So in total, policy only drove about 10 percent of the drop in economic activity. The other 90 percent was just people concerned about their own health staying home and choosing not to go out and engage in that economic activity. We find these policies have pretty modest effects.

We really can’t say whether it was right or wrong to do the policies. The economic case is that you might want to impose these sort of stay-at-home policies because of what’s called an externality. There’s a negative externality when there’s a pandemic in that, when I go out, I take into account the probability that I get sick or maybe that my family gets sick, but I don’t take into account the fact that some stranger I interact with, I might make them sick. And so you actually get a little less stay-at-home behavior than what you would really like to have, and that might be a role for government to come in and tell people, “Stay at home.”

The thing is we don’t know how much extra stay-at-home that should be unless we really have a good idea about how this disease transmits at a defined level and what it costs people to stay at home. So I don’t think we really know enough from this study to know whether it was the right amount of policy or not. But what we do know is it’s a pretty small effect compared to people’s own decisions about whether to go out and engage in economic activity or not.

One other thing we found is that when some of these policies were lifted later on, that the boost to economic activity was similarly pretty modest, about the same size actually. One lesson from that is you can’t just reignite the economy simply by lifting a stay-at-home order. You have to make people feel comfortable and safe to go out and engage in economic activity again. The way we like to say it is, the virus is the boss, and until you figure out how to solve the pandemic, you’re not really going to get back to a regular level of economic activity again.