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Economic resilience in times of public health shock: The case of the US states

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  • Osman, Syed Muhammad Ishraque
  • Islam, Faridul
  • Sakib, Nazmus

Abstract

Does adopting social distancing policies amid a health crisis, e.g., COVID-19, hurt economies? Using a machine learning approach at the intermediate stage, we applied a generalized synthetic control method to answer this question. We utilize state policy response differences. Cross-validation, a machine learning approach, is used to produce the “counterfactual” for adopting states—how they “would have behaved” without lockdown orders. We categorize states with social distancing as the treatment group and those without as the control. We employ the state time-period for fixed effects, adjusting for selection bias and endogeneity. We find significant and intuitively explicable impacts on some states, such as West Virginia, but none at the aggregate level, suggesting that social distancing may not affect the entire economy. Our work implies a resilience index utilizing the magnitude and significance of the social distancing measures to rank the states' resilience. These findings help governments and businesses better prepare for shocks.

Suggested Citation

  • Osman, Syed Muhammad Ishraque & Islam, Faridul & Sakib, Nazmus, 2022. "Economic resilience in times of public health shock: The case of the US states," Research in Economics, Elsevier, vol. 76(4), pages 277-289.
    • Handle: RePEc:eee:reecon:v:76:y:2022:i:4:p:277-289
    DOI: 10.1016/j.rie.2022.08.004
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    More about this item

    Keywords

    COVID-19; Economic resilience; Generalized synthetic control; Machine Learning and Causal Inference;
    All these keywords.

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics

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