When and how do business shutdowns work? Evidence from Italy's first COVID‐19 wave

Governments around the world have adopted unprecedented policies to deal with COVID‐19. This paper zooms in on business shutdowns and investigates their effectiveness in reducing mortality. We leverage highly granular death registry data for almost 5000 Italian municipalities in a diff‐in‐diff approach that allows us to mitigate endogeneity concerns credibly. Our results, which are robust to controlling for a host of co‐factors, offer strong evidence that business shutdowns effectively curb mortality. We calculate that they may have reduced the death toll from the first wave of COVID‐19 in Italy by about 40%. Our findings also highlight that timeliness is key – by acting 1 week earlier, their effectiveness could have been increased by an additional 5%. Finally, shutdowns should be targeted. Closing service activities with a high degree of interpersonal contact saves the most lives. Shutting down production activities, while substantially reducing mobility, only has mild effects on mortality.