Lockdown Without Loss? A Natural Experiment of Net Payoffs to COVID Lockdowns

Lacking a federal policy to control Covid-19, state governors ordered lockdowns and mask mandates, at different times, generating a massive natural experiment. The authors exploit this natural experiment to address four issues: 1) Were lockdowns effective in reducing infections? 2) At what costs to consumers? 3) Did lockdowns increase (signaling effect) or reduce (substitution effect) consumers’ mask adoption? 4) Did governors’ decisions depend on medical science or non-medical drivers? Analyses via difference-in-differences and generalized synthetic control indicate that lockdowns causally reduced infections. While lockdowns reduced 480 infections per million consumers per day (equivalent to a reduction of 56%), they reduced customer satisfaction by 2.2%, consumer spending by 7.5%, and GDP by 5.4% and significantly increased unemployment by 2% per average state by the end of the observation period. A counterfactual analysis shows that a nationwide lockdown on March 15, 2020, would have reduced total cases by 60%, while its absence would have resulted in five times more cases by April 30. The average cost of reducing a new infection was about $28,000 in lower GDP.