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Two Approaches to Saving the Economy: Micro-Level Effects of Covid-19 Lockdowns in Italy

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Abstract

In response to the two waves of Covid-19 in 2020, the Italian government implemented a general lockdown in March, but geographically targeted policies during fall. We exploit this natural experiment to compare the effects of the two policies in a difference-in-differences design, leveraging a unique database combining traditional, municipality-level and big data at weekly frequency. We find that the general lockdown of the first wave strongly reduced mobility at a high price in terms of employment, while the targeted policies during the second wave induced a lower decrease in mobility and little additional economic cost. We also study the role of pre-existing municipality characteristics and labour market policies in shaping these responses. Our results suggest that working from home and short-term work schemes buffered the adverse consequences of the drop in economic activity on the labour market. Both mechanisms, however, acted more strongly in high-income areas and among white collar workers, exacerbating existing inequalities.

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  • Cseres-Gergely, Zsombor & Kecht, Valentin & Le Blanc, Julia & Onorante, Luca, 2023. "Two Approaches to Saving the Economy: Micro-Level Effects of Covid-19 Lockdowns in Italy," Working Papers 2023-01, Joint Research Centre, European Commission.
    • Handle: RePEc:jrs:wpaper:202301
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    File URL: https://publications.jrc.ec.europa.eu/repository/handle/JRC132495
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    Keywords

    Covid-19; human mobility; lockdowns; big data; differences-in-differences;
    All these keywords.

    JEL classification:

    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health

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