Protecting Lives and Livelihoods with Early and Tight Lockdowns

28 Pages Posted: 5 Jan 2021

See all articles by Francesca Caselli

Francesca Caselli

International Monetary Fund (IMF)

Francesco Grigoli

International Monetary Fund (IMF)

Weicheng Lian

International Monetary Fund (IMF)

Damiano Sandri

International Monetary Fund (IMF) - Research Department

Date Written: November 2020

Abstract

Using high-frequency proxies for economic activity over a large sample of countries, we show that the economic crisis during the first seven months of the COVID-19 pandemic was only partly due to government lockdowns. Economic activity also contracted because of voluntary social distancing in response to higher infections. We also show that lockdowns can substantially reduce COVID-19 infections, especially if they are introduced early in a country's epidemic. Despite involving short-term economic costs, lockdowns may thus pave the way to a faster recovery by containing the spread of the virus and reducing voluntary social distancing. Finally, we document that lockdowns entail decreasing marginal economic costs but increasing marginal benefits in reducing infections. This suggests that tight short-lived lockdowns are preferable to mild prolonged measures.

JEL Classification: E10, I18, H00

Suggested Citation

Caselli, Francesca and Grigoli, Francesco and Lian, Weicheng and Sandri, Damiano, Protecting Lives and Livelihoods with Early and Tight Lockdowns (November 2020). IMF Working Paper No. 20/234, Available at SSRN: https://ssrn.com/abstract=3758067

Francesca Caselli (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Francesco Grigoli

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Weicheng Lian

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Damiano Sandri

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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