Thursday 24 June 2021

The data speak: Stronger pandemic response yields better economic recovery

The MIT Sloan School of Management, shows that in the 1918 flu pandemic, cities that had more aggressive interventions including social distancing also experienced stronger economic recoveries afterward.

In a March 2020 article by the Massachusetts Institute of Technology  (MIT), the study using data from the flu pandemic that swept the U.S. in 1918-1919, finds cities that acted more emphatically to limit social and civic interactions had more economic growth following the period of restrictions.

Cities that implemented social-distancing and other public health interventions just 10 days earlier than their counterparts saw a 5 percent relative increase in manufacturing employment after the pandemic ended, in 1923. Similarly, an extra 50 days of social distancing was worth a 6.5 percent increase in manufacturing employment, in a given city.

“We find no evidence that cities that acted more aggressively in public health terms performed worse in economic terms,” says Emil Verner, an assistant professor in the MIT Sloan School of Management and co-author of a new paper detailing the findings. “If anything, the cities that acted more aggressively performed better.”

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With that in mind, he observes, the idea of a “trade-off” between public health and economic activity does not hold up to scrutiny; places that are harder hit by a pandemic are unlikely to rebuild their economic capacities as quickly, compared to areas that are more intact.

“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,” Verner says.

The study, “Pandemics Depress the Economy, Public Health Interventions Do Not: Evidence from the 1918 Flu,” was posted to the Social Science Research Network as a working paper on March 26. In addition to Verner, the co-authors are Sergio Correia, an economist with the U.S. Federal Reserve, and Stephen Luck, an economist with the Federal Reserve Bank of New York.

Read the full article here.

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