Social distancing laws cause only small losses of economic activity during the COVID-19 pandemic in Scandinavia

Adam Sheridan*, Asger Lau Andersen, Emil Toft Hansen, Niels Johannesen

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review

33 Citations (Scopus)

Abstract

This paper uses real-time transaction data from a large bank in Scandinavia to estimate the effect of social distancing laws on consumer spending in the coronavirus 2019 (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% (95% CI: 24 to 26%) in Sweden and, as a result of the shutdown, by 4 additional percentage points (95% CI: 3 to 5 percentage points [p.p.]) in Denmark. This suggests that most of the economic contraction is caused by the virus itself and occurs regardless of social distancing laws. The age gradient in the estimates suggests that social distancing reinforces the virus-induced drop in spending for low-health-risk individuals but attenuates it for high-risk individuals by lowering the overall prevalence of the virus in the society.

Original languageEnglish
JournalProceedings of the National Academy of Sciences of the United States of America
Volume117
Issue number34
Pages (from-to)20468-20473
Number of pages6
ISSN0027-8424
DOIs
Publication statusPublished - 25 Aug 2020

Bibliographical note

This article contains supporting information online at https://www.pnas.org/lookup/suppl/doi:10.1073/pnas.2010068117/-/DCSupplemental.

Keywords

  • Consumer spending
  • COVID-19
  • Shutdown |
  • Social distancing

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