Corvinus
Corvinus

Economic Costs of Distancing Policy Interventions

Rácz, Olivér Miklós (2025) Economic Costs of Distancing Policy Interventions. Working Paper. Elsevier. DOI 10.2139/ssrn.5220235 (Unpublished)

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Abstract

Outbreaks of new viruses are increasingly likely in the warming global climate. Distancing policy interventions (DPIs) are expected to be the primary containment strategy in such events before medical treatments become feasible. DPIs, however, affect economic activity as well, making it important to measure the economic impact of DPIs. This paper estimates the effects of DPIs on selected indicators of monthly economic activity in the first year of the COVID-19 pandemic in a sample of 44 countries. The paper contributes policy-relevant economic effects and stronger external validity to existing literature. DPI effects are identified in a two-stage empirical design. The first stage leverages an observable sharp decline in weekly-frequency social interactions after implementing the first DPIs. In a difference-in-differences design, the second stage carries the policyinduced distancing effects over to monthly frequency macroeconomic indicators, such as industrial and manufacturing production, construction output, retail trade, inflation, and unemployment. I find significant output losses due to DPIs but no evidence for inflationary or unemployment effects. Results also demonstrate the relevance of voluntary distancing on output losses. Results suggest that output losses should be the primary concern of governments when considering distancing interventions in a future pandemic.

Item Type:Monograph (Working Paper)
Uncontrolled Keywords:COVID-19, social distancing, regression discontinuity, economic costs
Divisions:Institute of Economics
Subjects:Mathematics, Econometrics
Social welfare, insurance, health care
DOI:10.2139/ssrn.5220235
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ID Code:11269
Deposited By: Erzsó Nyitrai
Deposited On:22 May 2025 14:04
Last Modified:22 May 2025 14:04

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