Regional Policy Spillovers and Complementarity in the Great Lockdown

23 Pages Posted: 26 Apr 2021

See all articles by Xiaodong Fan

Xiaodong Fan

Monash University - Department of Economics

Chao He

East China Normal University (ECNU)

Jingnan (Jane) Liu

University of Wisconsin-Madison

Date Written: April 26, 2021

Abstract

Nonpharmaceutical interventions (NPIs) are the primary measures to control pandemics. Should regional governments coordinate in implementing NPIs? If so, how? The answers depend on spatial spillovers and complementarity or substitutability of regional NPIs. This paper estimates the spillover effects of stay-at-home (SAH) orders on the COVID-19 infection growth across adjacent counties on the state borders in the United States. We find that the spillover effects critically depend on the local implementation of SAH orders. With local SAH orders, the spillover effects reduce the daily case growth rate by 5.1 percentage points in the first three weeks of treatment, with an accumulative case reduction of 66.6 percent; otherwise, the spillover effects slightly increase the growth rate though statistically insignificant. Such strong complementarity in reducing infections is in contrast to previous findings of substitutability in changing mobility. Our results suggest that NPIs are best implemented jointly, and there may be coordination failures among decentralized regional governments.

Keywords: pandemics, COVID-19, lockdown, stay at home, social distancing, spillover, complementarity

JEL Classification: H0, I10

Suggested Citation

Fan, Xiaodong and He, Chao and Liu, Jingnan, Regional Policy Spillovers and Complementarity in the Great Lockdown (April 26, 2021). Available at SSRN: https://ssrn.com/abstract=3834495 or http://dx.doi.org/10.2139/ssrn.3834495

Xiaodong Fan

Monash University - Department of Economics ( email )

Australia

Chao He (Contact Author)

East China Normal University (ECNU) ( email )

North Zhongshan Road Campus
3663 N. Zhongshan Rd.
Shanghai, 200062
China

Jingnan Liu

University of Wisconsin-Madison ( email )

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