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New Study Finds Lockdown Halved the Spread of COVID-19 but Reduced GDP, Employment, and Consumer Satisfaction

LOS ANGELES – February 2023 – According to a new study, lockdowns reduced the spread of COVID-19 by 56%, equal to 480 fewer infections per million consumers per day. However, lockdowns came at a cost: they reduced GDP (−5.4%), employment (−2%), customer satisfaction (−2%), and consumer spending (−7.5%) for the next quarter. Reducing a new infection, on average, translated to a cost of $27,567 in lower gross domestic product (GDP). Titled, “Lockdown Without Loss? A Natural Experiment of Net Payoffs from COVID-19 Lockdowns,” the study is the first to capture the tradeoffs of lockdowns, weighing the effectiveness of disease reduction to their economic and personal costs. The paper was recently accepted and is forthcoming in the Journal of Public Policy and Marketing. The authors are Professors Gerard J. Tellis of USC Marshall School of Business, Ashish Sood of the University of California Riverside, Sajeev Nair of the University of Kansas, and Nitish Sood of Medical College of Georgia.

A federal policy to control COVID-19 did not exist in 2020, which allowed state governors to decide when, if at all, to order lockdowns and mask mandates. Mandatory stay-at-home orders were ordered at different times, creating a unique natural experiment that authors exploited to address four issues: their effectiveness, the cost to the economy and consumers, their effects on mask adoption, and why governors varied in ordering them. The study found that a nationwide lockdown set on March 15, 2020, would have reduced total cases by 60%. If all governors did not issue any lockdowns until April 23, 2020, the number of cases would have been five times higher by April 30.

“By examining the causal effects of state-ordered lockdowns, our research accurately reveals the tradeoff: lockdowns are effective in reducing the spread of the virus, but they come at a measurable cost to the economy and consumers,” says Gerard J. Tellis, Neely Chaired Professor of American Enterprise at the USC Marshall School of Business.

“Understanding the true costs and benefits of COVID-19 policies helps policymakers assess the payoff of past decisions and prepares them to navigate future large-scale health crises,” says Ashish Sood, Professor of Marketing, University of California Riverside.

Notably, lockdowns increased the public’s mask adoption rather than lowering them. “Preventive measures like mask usage and social distancing help reduce the transmission of the disease and the number of sick patients in hospitals,” says Nitish Sood from the Medical College of Georgia. The study found that lockdowns increased mask usage by 17.9%.

The study highlights how tensions between medical science and behavioral theories have fundamental implications for public policy, management, and consumers. Despite the economic costs, avoiding lockdowns in the belief that consumers would adopt masks may backfire. “Many experts thought that lockdowns would mitigate the need for masks. However, we found that lockdowns increased mask-wearing probably due to its signaling effect of the urgency of a pandemic,” says Sajeev Nair, Professor of Marketing, University of Kansas.

Importantly, the study’s authors show that the spread of the disease had no effect on governors’ decisions, as public health professionals hoped. Rather, the study found that governors were primarily motivated by political affiliation, imitating the policy of states affected earlier, and actions of governors of the same party who acted earlier.

To read the full study in the Journal of Public Policy and Marketing, click here.                                                                                                                             

Gerard J. Tellis is Neely Chaired Professor of American Enterprise, Director of the Institute of Outlier Research in Business and Director of the Center for Global Innovation at the USC Marshall School of Business. Ashish Sood is Academic Director of MBA programs and Associate Professor of Marketing at the University of California, Riverside. Sajeev Nair is Assistant Professor of Marketing at the University of Kansas School of Business. Nitish Sood is a MD candidate at the Medical College of Georgia.