COVID-19 policies should vary by location to mitigate negative economic effects

Key research finding

Stay-at-home orders were widely implemented in the United States to combat the spread of the virus, but their benefits came at costs to employment, earnings and spending felt by millions of people. 

Purdue University economics professor Mario J. Crucini and Vanderbilt University coauthor Oscar O’Flaherty found a 4 percentage-point decrease in consumer spending and hours worked caused by the implementation of stay-at-home orders in March 2020. Their final estimates reflected nearly a $10 billion drop in consumer spending and more than a $15 billion loss in employee earnings. They also found that 11.6% of lost jobs were attributed to stay-at-home orders. 

Their research working paper, “Stay-at-Home Orders in a Fiscal Union,” quantifies the economic impact of stay-at-home orders. Crucini and his colleagues also developed a model to analyze virus transmission and possible solutions.

The optimal infection mitigation policies, they found, were different for severely infected states vs. mildly infected states for almost 20 weeks. In other words, when states have different rates of infection and partial transmission, policy choices should be different as well. 

“The point our paper makes is that the choice should vary across locations based upon the epidemiological evidence both locally and more broadly,” Crucini said. “Areas with higher infection rates would have more restrictive policies than those with lower infection rates.”

Since statewide stay-at-home orders affected 90% of the U.S. population in the span of three weeks, it is clear these findings are critical when shaping policy going forward. 

Link: COVID-19 Policies Should Vary by Location to Mitigate Negative Economic Effects | Purdue Krannert

Purdue professor’s expertise

Mario Crucini is professor and Semler Chair in the Department of Economics. He has studied business cycles across countries for more than three decades and is excited about a new area of his research examining the growth and business cycle experiences of different locations within the United States. He is one of the leading macroeconomists in the country.

Journal name

Stay-at-Home Orders in a Fiscal Union (working paper)

Brief summary of methods

Combining data from the time-clock company Homebase and county-level data for every U.S. state from the nonprofit Opportunity Insights, they estimate labor-market and employment effects of COVID-19’s geographic spread and the role of stay-at-home orders. Spending data from Affinity Solutions was used to measure consumer spending.

They used their model to evaluate the best policies when infection rates are different in different locations. They assume the virus is not fully transmitted across locations, just like the conditions at the onset of the pandemic.