Lockdown Without Loss? A Natural Experiment of Net Payoffs from COVID-19 Lockdowns

Lacking a federal policy to control the spread of 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) What were the 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 nonmedical drivers? Analyses via difference-in-differences and generalized synthetic control methods indicate that lockdowns causally reduced infections. Although lockdowns reduced infections by 480 per million consumers per day (equivalent to a reduction of 56%), they reduced customer satisfaction by 2.2%, consumer spending by 7.5%, and gross domestic product 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%, whereas the absence of any state lockdowns would have resulted in five times more cases by April 30. The average cost of reducing the number of cases by one new infection was about $28,000 in lower gross domestic product.