This report provides an initial assessment of the possible short-term economy-wide effects of social distancing. These results should be taken as rough order-of-magnitude estimates meant to help inform decisionmakers during the coronavirus disease 2019 crisis.

An Estimation of the Economic Costs of Social-Distancing Policies

Aaron Strong, Jonathan W. Welburn

ResearchPublished May 4, 2020

Many state and local officials are making social-distancing policy decisions based on the actions of other locations rather than through a decisionmaking framework that evaluates these measures and their reduction of the spread of coronavirus disease 2019 (COVID-19). This report provides an initial assessment of the possible short-term economy-wide effects of social distancing. These results should be taken as rough order-of-magnitude estimates meant to help inform decisionmakers during the COVID-19 crisis.

Key Takeaways

  • Authors developed a computable general equilibrium model to evaluate economic outcomes. The Economic Impact Analysis for Planning Social Accounting Matrix for each state is used to calibrate the initial values of parameters within the model.
  • This work is based on readily accessible data and uses a simplified small, open-economy model of a metropolitan area. It focuses on five different policies, from school closures to population-wide quarantines.
  • Although much of the discussion within the popular media has focused on lower-income households, our analysis suggests that higher-earning households could experience a larger proportion of income decline from social-distancing policies.
  • Under optimistic assumptions of minimal closures, states with large populations are projected to suffer greater economic losses (possibly a reflection of higher per-capita incomes stemming from labor-supply reductions); under pessimistic assumptions of population-wide quarantines, losses are more concentrated in the Midwest (possibly because these states produce relatively high amounts of final-demand goods).

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Strong, Aaron and Jonathan W. Welburn, An Estimation of the Economic Costs of Social-Distancing Policies. Santa Monica, CA: RAND Corporation, 2020. https://www.rand.org/pubs/research_reports/RRA173-1.html.
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Funding for this independent research was provided by gifts from RAND supporters and income from operations. The research was jointly conducted by the Community Health and Environmental Policy Program in RAND Social and Economic Well-Being and the Access and Delivery Program in RAND Health Care.

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Version Note

This publication supersedes a previous version published in 2020 (WR-A173-1).