The effect of COVID-19 on the economy: Evidence from an early adopter of localized lockdowns

Abstract

Background Governments worldwide have implemented large-scale non-pharmaceutical interventions, such as social distancing or school closures, to prevent and control the growth of the COVID-19 pandemic. These strategies, implemented with varying stringency, have imposed substantial social and economic costs to society. As some countries begin to reopen and ease mobility restrictions, lockdowns in smaller geographic areas are increasingly considered an attractive policy intervention to mitigate societal costs while controlling epidemic growth. Nevertheless, there is a lack of empirical evidence to support these decisions. Methods Drawing from a rich data set of localized lockdowns in Chile, we used econometric methods to measure the reduction in local economic activity from lockdowns when applied to smaller or larger geographical areas. We measured economic activity by tax collection at the municipality-level. Results Our results show that lockdowns were associated with a 10%-15% drop in local economic activity, which is twice the reduction in local economic activity suffered by municipalities that were not under lockdown. A three-to-four-month lockdown had a similar effect on economic activity than a year of the 2009 great recession. We found costs are proportional to the population under lockdown, without differences when lockdowns were measured at the municipality or city-wide levels. Conclusions Our findings suggest that localized lockdowns have a large effect on local economic activity, but these effects are proportional to the population under lockdown. Our results suggest that epidemiological criteria should guide decisions about the optimal size of lockdown areas since the proportional impact of lockdowns on the economy seems to be unchanged by scale.

Are Mobility and COVID-19 Related? A Dynamic Analysis for Portuguese Districts

“…Even with the start of vaccination programs, it has not been possible to break the advance of the numbers, primarily because the speed of vaccination is asymmetric in different countries, but also because, contrarily to some respiratory diseases in the past, the spread between countries was higher [ 1 , 2 , 3 ]. With various negative economic and financial effects (see References [ 4 , 5 , 6 , 7 , 8 , 9 , 10 ]), COVID-19 also has several other consequences in people’s lives, such as fear and depression [ 11 , 12 ], suicide trends [ 13 ] or in mental health [ 14 , 15 ].…”

Vaccination Is Not Enough: Understanding the Increase in Cases of COVID-19 in Chile despite a High Vaccination Rate

“…This is, in part, especially true for the poorest and most vulnerable part of the population, who are more likely to go out to earn their living. With 30% of its workforce being in the informal sector, this is a highly relevant factor in Chile [39].…”

“…Continuing mask wearing, social distancing and travel restrictions remain important, as well as ensuring psychological and social balance. Policy makers need to take decisions on COVID-19 control strategies, considering their epidemiological outcome, as well as the associated social, and economic effects [39]. Each intervention should be adapted to the local and regional context.…”

Public health decisions in the COVID-19 pandemic require more than ‘follow the science’

“…The pandemic is taking a heavy human toll, 66 and largescale non-pharmaceutical strategies to control its spread, such as school closures and lockdowns, have imposed enormous social and economic costs on societies. [67][68][69][70] For many individuals, the vaccine is the only hope for a return to normalcy, 66 where work, education, leisure, family and friendships can be experienced again without significant threats to health. The UK's and many other countries' decision in approving a COVID-9 vaccine without complete certainty illustrates the complexities of public health decisions.…”