05-24-2020, 12:24 AM
Quote:This paper uses transaction data from a large bank in Scandinavia to estimate the effect of social distancing laws on consumer spending in the COVID-19 pandemic. The analysis exploits a natural experiment to disentangle the effects of the virus and the laws aiming to contain it: Denmark and Sweden were similarly exposed to the pandemic but only Denmark imposed significant restrictions on social and economic activities.We estimate that aggregate spending dropped by around 25 percent in Sweden and, as a result of the shutdown, by 4 additional percentage points in Denmark. This implies that most of the economic contraction is caused by the virus itself and occurs regardless of whether governments mandate social distancing or not. The age gradient in the estimates suggest that social distancing reinforces the virus-induced drop in spending for individuals with low health risk but attenuates it for individuals with high health risk by lowering the overall prevalence of the virus in the society. 2005.04630.pdf