A Novel Supply-Side Input-Output Approach for A Quick Measurement and Decomposition of the Economywide Effects of Sectoral Shutdowns Against Covid-19 and an Application to the Turkish Economy

This paper describes a novel approach proposed for use in the assessment of economywide costs of sectoral shutdowns introduced to curb the spread of Covid-19. Based on a supply-driven input-output (IO) model, our methodological framework allows for a decomposition of the total impact of sectoral shutdowns into i) losses in sectoral outputs resulting directly from the idling of factors of production employed in the sectors ordered to shut down, and indirectly from broken input-output linkages due to ii) interruption of the delivery of inputs from the sectors that have been shut down to others, and iii) suspension of input purchases by these sectors from others. We demonstrate the use of proposed methodology to measure and decompose the effects of first round of shutdown orders that the Turkish government ordered for a number of service sectors over the period between March and June 2020 as part of the fight against the Covid-19 outbreak. We employ data from the most recent input-output table for Turkey, and carry out four simulation experiments. Our findings revealed that the upper bound for the cost of shutting down five sectors considered in the study could go as high as 7.2 percent of total gross output on an annual basis, exceeding 13 billion dollars in lost output and factor incomes.