Causal Effects of Closing Businesses in a Pandemic

Abstract

We estimate the causal effects of state-level mandatory business closures implemented in response to the outbreak of the Covid-19. Using within-state variations in exposure to these restrictions, we find that they impose substantial losses to firms and workers, the former bearing 70% of the cost, consistent with firms partially insuring their workers. While mandatory business closures have a significant negative causal effect on mortality rates, we show that the implied cost-per-life-saved is higher than the value of a statistical life typically considered for policy design, and that it could have been lowered by more selectively targeting restrictions.

Keywords: COVID-19, pandemic, business closures, non-essential businesses

JEL Classification: E32, I10, I18, H1