Impacts on the U.S. Macroeconomy of Mandatory Business Closures in Response to the COVID-19 Pandemic

10 Pages Posted: 7 Apr 2020 Last revised: 27 Apr 2020

See all articles by Terrie Walmsley

Terrie Walmsley

ImpactECON, LLC; University of Southern California - Center for Risk and Economic Analysis of Terrorism Events (CREATE)

Adam Rose

University of Southern California - Sol Price School of Public Policy

Dan Wei

University of Southern California - Sol Price School of Public Policy

Date Written: April 6, 2020

Abstract

We estimate the macroeconomic impacts of mandatory business closures in the U.S. and many other countries in order to control the spread of the COVID-19. The analysis is based on the application of a modified version of the GTAP computable general equilibrium (CGE) model. We simulate mandatory closures in all countries or parts of countries that had imposed them as of April 7 for three-month and six-month cases. For the three-month scenario, we estimate a 20.3% decline of U.S. GDP on an annual basis, or $4.3 trillion. The employment decline of 22.4% in the U.S. for the three-month closure represents 35.2 million workers for that time period. Should the mandatory closures be extended to six months, these negative impacts slightly more than double. The employment impacts are slightly greater in percentage terms than the GDP impacts because most service sectors, which are generally more labor-intensive, are much more negatively impacted by the closures than are manufacturing sectors and other critical sectors. Our results should be considered upper-bound estimates given such assumptions as businesses laying off workers no longer paying them wages or salaries. Note also that the paper examines the mandatory closures alone and does not factor in any countervailing fiscal or monetary policies.

Keywords: COVID-19, Mandatory Closures, Macroeconomic Impacts, CGE Modeling

JEL Classification: E65, I15, C68

Suggested Citation

Walmsley, Terrie and Rose, Adam and Wei, Dan, Impacts on the U.S. Macroeconomy of Mandatory Business Closures in Response to the COVID-19 Pandemic (April 6, 2020). Available at SSRN: https://ssrn.com/abstract=3570117 or http://dx.doi.org/10.2139/ssrn.3570117

Terrie Walmsley

ImpactECON, LLC ( email )

1942 Broadway
Suite 314
Boulder, CO 80302
United States

University of Southern California - Center for Risk and Economic Analysis of Terrorism Events (CREATE) ( email )

United States

Adam Rose

University of Southern California - Sol Price School of Public Policy ( email )

Los Angeles, CA 90089-0626
United States

Dan Wei (Contact Author)

University of Southern California - Sol Price School of Public Policy ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

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