Purdue University sets another donation record (PHOTO: Purdue University)
PHOTO: Purdue University

Purdue Study: States With Immediate Economic Shutdowns Lost Billions

WEST LAFAYETTE, Ind. — When the pandemic began in March of 2020, some states began immediate stay at-home orders, or quarantines. Some states chose quarantines at a later date, but what happened immediately to the economies of the first states to implement quarantines?

They took a hit, according to an ongoing study from Purdue University.

Mario Crucini is an economics professor at Purdue University. He and his team decided to take a look at each state’s economy from March of 2020 to May of 2020. That short two months serves to show the research team the immediate economic effect of quarantines. The goal of the study is to try and determine what kind of policy is best at the start of a pandemic: a one size fits all shutdown, or individual decisions made at the local level.

For the state’s who chose to start quarantines immediately, Crucini says they were hit with a four to five-percent decrease in consumer spending and hours worked.

“Now, later on, of course, there were recoveries right? So the long run effects might be very small,” Crucini explains, “but that immediate effect in terms of a monthly flow of consumption expenditure and hours worked is about 5-percent in month two.”

Crucini and his team came up with a final estimate of nearly $10 billion drop in consumer spending and more than a $15 billion loss in employee earnings. The team also found that 11.6-percent of jobs lost were due to stay-at-home orders.

So what does all of this mean? Crucini says that so far, his research team has found that one size fits all policies are just not good for the economy.

Crucini explains, “the infection rates at different locations and the economic consequences of those stay orders kind of have to allow for some discretion at the local level. So, we want tighter restrictions that have higher infection rates obviously, in order to not get economics costs spilling over to other locations where infection rates are much lower.”

“So the point we’re trying to make is that you need to have policies that are more decentralized,” Crucini continues, “more catered to local and state conditions. That means giving discretion to local public officials, local leaders.”

Crucini’s research team combined data from the time-clock company Homebase, and utilized county-level data for every U.S. state from the nonprofit Opportunity Insights, whom estimated labor-market and employment effects of COVID-19’s geographic spread, and how quarantine orders played a role. The spending data from Affinity Solutions was used by the team to measure consumer spending.

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