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Causal effects of closing businesses in a pandemic

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  • Barrot, Jean-Noël
  • Bonelli, Maxime
  • Grassi, Basile
  • Sauvagnat, Julien

Abstract

We study whether state-level mandatory business closures implemented in response to the outbreak of the Covid-19 causally affect economic and health outcomes. Using plausibly exogenous variations in exposure to these restrictions, we find that they impose substantial losses to firms and workers, the former bearing approximately two thirds of the cost, consistent with firms partially insuring their workers. We show that mandatory business closures have a significant negative causal effect on mortality rates, particularly in areas featuring contact-intensive occupations. We discuss the assumptions under which the health benefits of business closures exceed their associated economic costs.

Suggested Citation

  • Barrot, Jean-Noël & Bonelli, Maxime & Grassi, Basile & Sauvagnat, Julien, 2024. "Causal effects of closing businesses in a pandemic," Journal of Financial Economics, Elsevier, vol. 154(C).
    • Handle: RePEc:eee:jfinec:v:154:y:2024:i:c:s0304405x24000175
    DOI: 10.1016/j.jfineco.2024.103794
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    More about this item

    Keywords

    Business closures; Profits; Wages; Covid-19;
    All these keywords.

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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