Sectoral Effects of Social Distancing

31 Pages Posted: 15 Apr 2020 Last revised: 7 Jul 2020

See all articles by Jean-Noel Barrot

Jean-Noel Barrot

HEC Paris

Basile Grassi

Bocconi University - Department of Economics; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research; Centre for Economic Policy Research (CEPR)

Julien Sauvagnat

Bocconi University; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

Date Written: April 2, 2020

Abstract

The health crisis caused by the outbreak of the COVID-19 virus has led many countries to implement drastic social distancing rules. By reducing the quantity of labor, social distancing in turn leads to a drop in output which is difficult to quantify without taking into account relationships between sectors. Starting from a standard model of production networks, we analyze the sectoral effects of the shock in the case of France. We estimate that six weeks of social distancing brings GDP down by 5.6%. Apart from sectors directly concerned by social distancing mesures, those whose value added decreases the most are upstream sectors, i.e. sectors most distant from final demand. The same exercise is carried out for other European countries, taking into account national differences in sectoral composition and propensity to telework. Finally, we analyze the economic impact of selectively phasing out social distancing by sector, region or age group.

Keywords: COVID-19, social distancing, production networks

JEL Classification: E32, I10, I18, H1, L14, E32, E23

Suggested Citation

Barrot, Jean-Noel and Grassi, Basile and Sauvagnat, Julien, Sectoral Effects of Social Distancing (April 2, 2020). HEC Paris Research Paper No. FIN-2020-1371, Available at SSRN: https://ssrn.com/abstract=3569446 or http://dx.doi.org/10.2139/ssrn.3569446

Jean-Noel Barrot (Contact Author)

HEC Paris ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

Basile Grassi

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Julien Sauvagnat

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

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