In these early weeks, the fear of COVID-19 was the driving force behind the decline in retail spending, since spending declined by similar amounts even in states without lockdowns. At the beginning of the lockdown, nonessential in-store spending fell close to zero in all four states, even those that did not institute shutdowns. Two of them-Illinois and Massachusetts-instituted retail shutdowns, while two others-Nebraska and Arkansas-did not. To summarize our findings, we present a case study of four states in Figure 2 below. ![]() Importantly, the panel distinguishes between spending that is done in-store, and will therefore be affected by stay-at-home orders and retail shutdown policies, and online/essential retail, which is not affected by the laws. The data allow for a detailed look at how consumers are spending their money. In our working paper, we analyze the effects of business restrictions on consumer spending using data from Earnest Research, a company that analyzes spending data from a panel of 6 million U.S. Two studies by the Centers for Disease Control and Prevention and Johns Hopkins University demonstrate that allowing indoor dining is associated with a substantial rise in COVID cases and that stay-at-home orders are effective in reducing COVID-19 infections. The restrictions successfully deterred a large majority of consumers from behavior that would have been beneficial to a superficial measure of welfare-aggregate GDP-but which would have led to the increased spread of the coronavirus and COVID-19. These results show that the restrictions put in place by governments had their intended effect. Even in recovery, consumption remains depressed, compared to previous recessions. We find the retail and restaurant spending restrictions caused substantial declines in spending for the categories directly affected by restrictions, such as nonessential in-store retail items and full-service in-restaurant dining. In April and May, however, fear of COVID-19 declined while restrictions on nonessential shopping remained in place. In the early weeks of the pandemic, spending declines were driven fully by fear of catching the coronavirus, and not by restrictions on consumer behavior such as stay-at-home orders. We find equally striking results about the interplay between fear of COVID-19 and restrictions on consumer behavior. candidate in economics at the University of Illinois at Chicago, analyze the causes of the decline and rise in retail spending in the United States-a striking decline of almost 20 percent 2 months after the crisis, followed by a rapid recovery and then a transition to a slow increase. In our new working paper, I and my co-author, Raissa Dantas, a Ph.D. As such, the declines in consumer spending that restrictions bring are not the costs of these policies in fact, they are the benefits. The very purpose of restrictions on retail and restaurant activity is to decrease visits, and thus spending decreases. As many countries and states have learned by hard experience, a premature reopening is a recipe for a dramatic rise in cases, hospitalizations, and deaths. Yet policies that maximize GDP and employment do not maximize welfare because crowded stores and restaurants can cause widespread COVID-19 infections in customers and workers, leading to further outbreaks. Understanding what is driving consumer spending-and, in particular, the effects of lockdown policies-is crucially important in designing policies for a full economic recovery, as consumption is two-thirds of Gross Domestic Product. The onset of the coronavirus pandemic and the rising death toll from COVID-19, the disease caused by the virus, initiated an unprecedented decline in consumer spending in the United States, dwarfing the effects of any previous recession.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |