Post-pandemic recoveryThe Data Speak: Stronger Pandemic Response Yields Better Economic Recovery
With much of the U.S. in shutdown mode to limit the spread of the COVID-19 disease, a debate has sprung up about when the country might “reopen” commerce, to limit economic fallout from the pandemic. But as a new study co-authored by an MIT economist shows, taking care of public health first is precisely what generates a stronger economic rebound later. His study of the 1918 flu pandemic shows U.S. cities which responded more aggressively in health terms also had better economic rebounds.
The research described in this article has been published as a working paper but has not yet been peer-reviewed by experts in the field.
With much of the U.S. in shutdown mode to limit the spread of the COVID-19 disease, a debate has sprung up about when the country might “reopen” commerce, to limit economic fallout from the pandemic. But as a new study co-authored by an MIT economist shows, taking care of public health first is precisely what generates a stronger economic rebound later.
The study, using data from the flu pandemic that swept the U.S. in 1918-1919, finds cities that acted more emphatically to limit social and civic interactions had more economic growth following the period of restrictions.
Indeed, cities that implemented social-distancing and other public health interventions just 10 days earlier than their counterparts saw a 5 percent relative increase in manufacturing employment after the pandemic ended, through 1923. Similarly, an extra 50 days of social distancing was worth a 6.5 percent increase in manufacturing employment, in a given city.
“We find no evidence that cities that acted more aggressively in public health terms performed worse in economic terms,” says Emil Verner, an assistant professor in the MIT Sloan School of Management and co-author of a new paper detailing the findings. “If anything, the cities that acted more aggressively performed better.”
With that in mind, he observes, the idea of a “trade-off” between public health and economic activity does not hold up to scrutiny; places that are harder hit by a pandemic are unlikely to rebuild their economic capacities as quickly, compared to areas that are more intact.
“It casts doubt on the idea there is a trade-off between addressing the impact of the virus, on the one hand, and economic activity, on the other hand, because the pandemic itself is so destructive for the economy,” Verner says.
The study, “Pandemics Depress the Economy, Public Health Interventions Do Not: Evidence from the 1918 Flu,” was posted to the Social Science Research Network as a working paper on March 26. In addition to Verner, the co-authors are Sergio Correia, an economist with the U.S. Federal Reserve, and Stephen Luck, an economist with the Federal Reserve Bank of New York.
