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Disentangling Policy Effects Using Proxy Data: Which Shutdown Policies Affected Unemployment During the COVID-19
1Harvard University and Harvard Medical School.
Journal of Public Economics
|October 6, 2025
Summary
Non-pharmaceutical interventions (NPIs) like business closures had minor direct impacts on unemployment claims during early COVID-19. Most job losses stemmed from other factors, not specific NPIs.
Area of Science:
- Economics
- Public Health
- Epidemiology
Background:
- The COVID-19 pandemic necessitated rapid implementation of non-pharmaceutical interventions (NPIs) across U.S. states.
- Understanding the direct economic impact of various NPIs is crucial for policy evaluation.
Purpose of the Study:
- To disentangle the short-run direct impacts of different state-level NPIs on unemployment claims.
- To quantify the contribution of specific NPIs to unemployment growth during the early pandemic.
Main Methods:
- Utilized high-frequency Google search data and NPI announcement dates in an event study framework.
- Leveraged differential timing of NPIs (e.g., business closures, stay-at-home orders) to identify individual effects.
- Employed proxy outcomes to estimate causal impacts with limited outcome data.
Main Results:
- Restaurant/bar limitations and non-essential business closures explained 6.0% and 6.4% of initial unemployment claims, respectively.
- Other NPIs, including school closures and large gathering bans, showed no direct increase in state unemployment claims.
- The majority of short-run unemployment increases were attributed to factors beyond direct NPI mandates.
Conclusions:
- Specific NPIs like business closures had a limited direct effect on early pandemic unemployment.
- Broader economic factors, consumer demand shifts, and private sector policies played a more significant role in unemployment increases.
- Policy insights suggest a nuanced understanding of NPI economic consequences is necessary.
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