The Cost of COVID-19: A Rough Estimate of the 2020 US GDP Impact

Abstract

In this brief, we provide a back-of-the-envelope estimate of the impact of current mitigation measures on the 2020 GDP growth rate. That impact varies by industry, and we are able to identify this variation by adopting a simple but plausible assumption: industries will remain in business in proportion to their degree of digitalization. To measure digitalization, we use the share of information-technology-intensive workers in a given industry relative to the industry’s total workforce. Furthermore, our granular dataset is broken down at the level of industrial activity within counties, which allows us to make GDP forecasts at the county level.

We estimate that the real GDP growth rate will decline 5 percent for each month of partial economic shutdown. Therefore, the economic cost of the first two months spent fighting the pandemic will be $2.14 trillion (10 percent), which is surprisingly close to the static fiscal cost of the CARES Act.

Keywords: GDP, economic indicators, healthcare, coronavirus, coronavirus pandemic, COVID-19, public health, economics, quarantine, economy, economic crisis

JEL Classification: H51, I00, I18, E01, O40