In the face of a debate about when the US might “reopen” commerce to limit economic fallout from the covid-19 pandemic, a study coauthored by MIT Sloan economist Emil Verner shows that restricting economic activity to protect public health actually generates a stronger economic rebound.
Using data from the flu pandemic that swept the US in 1918–19, the working paper finds cities that did more to limit social and civic interactions had more economic growth later. Indeed, cities that implemented social distancing and other interventions just 10 days earlier than their counterparts saw a 5% relative increase in manufacturing employment after the pandemic ended, through 1923. Similarly, an extra 50 days of social distancing was worth a 6.5% increase in manufacturing employment.
Verner says the implications are clear: “It casts doubt on the idea there is a trade-off between addressing the impact of the virus, on the one hand, and economic activity, on the other hand, because the pandemic itself is so destructive for the economy.”
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