Mobility and Consumption Choices during the COVID-19 Pandemic
38 Pages Posted: 20 Jul 2021 Last revised: 16 Feb 2022
Date Written: April 29, 2021
How does the risk of COVID-19 infection affect agents’ economic choices? This paper sheds light on this issue by analyzing how people’s retail and recreation mobility, a high-frequency proxy for consumption and economic activity, responded to the diffusion of COVID-19 during the early stage of the first wave. COVID-19 affected people’s choices directly, through voluntary distancing, and indirectly, through government responses, such as the introduction of mandatory closures and nationwide stay-at-home orders, which impede people from moving. Obtaining accurate estimates of the two effects requires disentangling the two channels. We propose a simple yet novel identification strategy based on the unique peculiarities of the first COVID-19 wave. We exploit the timing gap between the first reported case and the “unanticipated” implementation of mandatory restrictions and the variability of these events in the European context to show that a 1% increase in daily cases reduced mobility by approximately 0,02%. This result suggests that the epidemic strongly affects household spending and economic activity, even without mandatory mobility restrictions.
Keywords: COVID-19, virus fear, contagion risk, precautionary behavior, mobility
JEL Classification: I10, D81, H7, L51
Suggested Citation: Suggested Citation