The Impact of Government Interventions on COVID-19 Spread and Consumer Spending

Abstract

We examine the impact of government interventions on the spread of COVID-19 and consumer spending. We do this by first estimating models of COVID-19 spread, consumer spending, and social distancing in the United States during the early stages of the COVID-19 pandemic. Social distancing has a large effect on reducing COVID-19 spread and is responsive to national and local case numbers. Nonmask government interventions reduce COVID-19 spread, whereas the effectiveness of mask mandates is much smaller and statistically insignificant. Mask mandates tend to increase social distancing, as do nonmask governmental restrictions as a whole. Social distancing hurts spending in the absence of a mask mandate but has a negligible effect on spending if there is a mask mandate. Mask mandates have a direct effect of increasing spending in counties with high levels of social distancing while reducing spending in counties with low levels of social distancing. We use these three estimated models to calculate the effect of mask mandates and other governmental interventions on COVID-19 cases, deaths, and consumer spending. Implemented mask mandates decreased COVID-19 cases by a statistically insignificant 774,000 cases, saving 28,000 lives, over a four-month period, but led to $76B–$155B of additional consumer spending. Other nonmask governmental interventions that were implemented reduced the number of COVID-19 cases by 34M, saving 1,230,000 lives, while reducing consumer spending by approximately $470B–$703B over our 4-month period of the study. Thus, these restrictions were cost effective as long as one values each saved life at $387,000–$608,000 or more. This paper was accepted by Matt Shum, marketing. Supplemental Material: The data is available at https://doi.org/10.1287/mnsc.2023.4853 .