Link here, twitter thread here.
Among the many unprecedented effects of the pandemic, the ‘V’ shaped pattern in consumer spending was something we’ve never seen before in a recession. The new paper looks into one particular cause of the pattern: the business closing and reopening policies that state governments pursued in order to stop the spread of Covid-19.
Early work has generally found that business shutdown policies didn’t have large effects on spending (Chetty et. al. , Goolsbye and Syverson), and that the pattern was caused mainly by fear of Covid. Our paper finds quite different results, that in fact the retail shutdowns substantially affected spending.
An advantage of our paper is the really great data that was provided by Earnest Research, which allowed us to really pinpoint the sectors that the shutdowns and reopenings affected.
We find reopening policies substantially increased spending for categories directly impacted by the laws: a 68.4 p.p. increase in non-essential in-store spending and a 16.7 p.p. increase in full-service indoor dining. For sectors not directly impacted — essential retail, limited-service restaurants, and online — we find a limited impact of reopenings. We estimate that retail reopenings are responsible for 34% of the total trough-to-peak recovery in spending, while restaurant reopenings are responsible for 15% of the recovery.