Causal Effects of Closing Businesses in a Pandemic

51 Pages Posted: 13 May 2020 Last revised: 9 Apr 2021

See all articles by Jean-Noel Barrot

Jean-Noel Barrot

HEC Paris; HEC Paris

Maxime Bonelli

HEC Paris - Finance Department

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 4, 2021

Abstract

We estimate the causal effect of state-mandated business closures on economic and health outcomes in the context of the COVID-19 crisis in the US. We first show that business closures lead to a substantial drop in sales, earnings, and market values for affected firms. We then exploit sectoral variations in exposure to these restrictions across areas within the same state, and show that locking down 10% of the labor force is associated with a significant contraction in employment, but allows to reduce COVID-19 weekly infection and death rates by respectively 0.023 and 0.0015 percentage points. The findings translate into 24,000 saved lives for a cost of $115 billion. Finally, our empirical analysis suggests that the cost per life saved associated to business closures could have been significantly reduced if restrictions had targeted areas with intense workplace interactions

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

JEL Classification: E32, I10, I18, H1

Suggested Citation

Barrot, Jean-Noel and Barrot, Jean-Noel and Bonelli, Maxime and Grassi, Basile and Sauvagnat, Julien, Causal Effects of Closing Businesses in a Pandemic (April 4, 2021). Available at SSRN: https://ssrn.com/abstract=3599482 or http://dx.doi.org/10.2139/ssrn.3599482

Jean-Noel Barrot (Contact Author)

HEC Paris ( email )

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

HEC Paris ( email )

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

Maxime Bonelli

HEC Paris - Finance Department ( email )

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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