Working Paper: NBER ID: w27432
Authors: Austan Goolsbee; Chad Syverson
Abstract: The collapse of economic activity in 2020 from COVID-19 has been immense. An important question is how much of that resulted from government restrictions on activity versus people voluntarily choosing to stay home to avoid infection. This paper examines the drivers of the collapse using cellular phone records data on customer visits to more than 2.25 million individual businesses across 110 different industries. Comparing consumer behavior within the same commuting zones but across boundaries with different policy regimes suggests that legal shutdown orders account for only a modest share of the decline of economic activity (and that having county-level policy data is significantly more accurate than state-level data). While overall consumer traffic fell by 60 percentage points, legal restrictions explain only 7 of that. Individual choices were far more important and seem tied to fears of infection. Traffic started dropping before the legal orders were in place; was highly tied to the number of COVID deaths in the county; and showed a clear shift by consumers away from larger/busier stores toward smaller/less busy ones in the same industry. States repealing their shutdown orders saw identically modest recoveries--symmetric going down and coming back. The shutdown orders did, however, have significantly reallocate consumer activity away from “nonessential” to “essential” businesses and from restaurants and bars toward groceries and other food sellers.
Keywords: COVID-19; economic decline; government restrictions; consumer behavior
JEL Codes: E6; H7; L51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| legal shutdown orders (J65) | economic activity (E20) |
| fear of infection (I12) | consumer behavior (D19) |
| COVID-19 deaths in the county (I12) | consumer behavior (D19) |
| legal shutdown orders (J65) | decline in consumer traffic (R22) |
| voluntary consumer choices (D10) | decline in economic activity (F44) |
| shutdown orders (J65) | reallocation of consumer activity (D16) |
| repeal of shutdown orders (J65) | economic activity (E20) |