Pandemics Depress the Economy, Public Health Interventions Do Not: Evidence from the 1918 Flu

Review written by Yinuo Zhang (ECON)

The tradeoff between social distancing and its potential adverse economic effects has been at the center of debates during COVID-19 in the United States. On one hand, it is crucial to practice social distancing to prevent further spread of COVID-19. On the other hand, economic activities plummeted due to the closing of non-essential businesses mandated by many states. As a result, initial unemployment claims reached an unprecedented number of over 6.8 million on March 28th, the highest since 1967. The rapid development of COVID-19 has called urgent attention to the impact of existing public health interventions and its consequences on the real economy. In particular, do non-pharmaceutical interventions (NPI) like social distancing further hinder economic activity on top of the ongoing pandemic? Does the tradeoff between social distancing and subdued economic activities exist?

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