Lives versus Livelihoods during the COVID-19 Pandemic : How Testing Softens the Trade-off

The early COVID-19 pandemic literature focused on the conflict between lives and livelihoods. But cross-country evidence reveals that across countries high mortality rates were often associated with large gross domestic product contractions. This paper shows that the presumed trade-off was associated with lockdowns as the primary instrument of containment. Early transition from lockdowns to testing-tracing-isolation-based containment softened the trade-off within countries and explains the absence of a trade-off across countries. The analysis finds that testing had positive indirect effects on growth and perhaps even positive direct effects. By allowing countries to relax shutdowns without compromising on containment, testing could have indirectly contributed to about a 0.6 percentage point boost in growth. By infusing greater confidence in people to step out and engage in economic activity, testing could have added another 0.6 percentage point to growth. As the world struggles to scale up vaccination in the face of new waves and variants, continued emphasis on testing could help limit infection without recourse to costly lockdowns.