Supply Chain Disruptions Due to COVID-19 and Social Distancing


Apr 28, 2020

Commercial trucks cross over the Ambassador Bridge at the international border crossing during the COVID-19 outbreak, in Detroit, Michigan, March 18, 2020, photo by Rebecca Cook/Reuters

Commercial trucks cross over the Ambassador Bridge at the international border crossing during the COVID-19 outbreak, in Detroit, Michigan, March 18, 2020

Photo by Rebecca Cook/Reuters

Since the outbreak of COVID-19, social distancing has provided a means to “flatten the curve” and hopefully, reduce the curve. There are significant epidemiological and economic risks and uncertainties to the policies. New estimates for the epidemiological consequences and criterion for when these policies are removed do not tell the full story of social impact by themselves and must be paired with clarity around economic impacts, and how these vary by industry sector.

To better ground the economic costs of remaining in effect, we have estimated the economy-wide impacts of a set of social distancing policies that have been used across the United States. Our estimates provide a sense of the likely economic toll due to these policies.

The economic toll is not just tied to those industries directly impacted by these policies such as restaurants and bars, but its impacts are being felt across the board due to supply chain disruptions and a reduction in demand. Weekly unemployment numbers (PDF) cut across every geography, industry, and class. The important interconnections that make an economy strong also provide a means for disruptions to cascade throughout the entire economy.

Our results show that the economic costs of these policies vary widely across states, with aggregate income declines of 45 percent in states like Indiana, Wisconsin and Iowa for our worst-case scenario. These results do not take into account the reduction in demand that is likely to arise due to unemployment and households staying home. Based on our national level results, for every week that we have strict social distancing policies in place, we are reducing the Gross National Income (GNI) by approximately 0.5 percent. That is, if these policies are kept in place for three months, it would likely mean a drop of 6 percent due solely to the social distancing policies. If a modest 10 percent reduction in household demand is included, these results increase to a 9 percent drop in GNI.

Figure 1: Distribution of Percent Change in Weekly Gross State Income

Figure 1: Distribution of percent change in weekly Gross State Income

Source: An Estimation of the Economic Costs of Social-Distancing Policies, WRA173-1, RAND, 2020.

State Percentage
Alabama 22.2%
Alaska 9.0%
Arizona 16.4%
Arkansas 29.1%
California 21.3%
Colorado 21.4%
Connecticut 26.4%
Delaware 23.7%
Florida 20.8%
Georgia 18.8%
Hawaii 13.6%
Idaho 29.4%
Illinois 26.9%
Indiana 45.1%
Iowa 43.1%
Kansas 36.9%
Kentucky 21.5%
Louisiana 24.7%
Maine 28.8%
Maryland 17.7%
Massachusetts 28.8%
Michigan 33.3%
Minnesota 33.1%
Mississippi 23.1%
Missouri 33.3%
Montana 28.7%
Nebraska 38.7%
Nevada 18.5%
New Hampshire 29.0%
New Jersey 20.7%
New Mexico 12.2%
New York 20.8%
North Carolina 16.2%
North Dakota 27.7%
Ohio 36.6%
Oklahoma 18.4%
Oregon 27.8%
Pennsylvania 28.3%
Rhode Island 23.6%
South Carolina 25.4%
South Dakota 32.2%
Tennessee 38.4%
Texas 18.6%
Utah 25.1%
Vermont 39.0%
Virginia 11.1%
Washington 12.5%
West Virginia 20.1%
Wisconsin 44.9%
Wyoming 20.6%

It is important to recognize that these economic costs are balanced by decreasing infection, hospitalization, and deaths. It is up to the state and local decisionmakers to weigh the benefits and costs of these policies. Our hope is that we are helping provide one side of the story.

Aaron Strong is an economist and Jonathan Welburn is an operations researcher at the nonprofit, nonpartisan RAND Corporation. Both are professors at the Pardee RAND Graduate School.

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