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Pandemic, Shutdown and Consumer Spending: Lessons from Scandinavian Policy Responses to COVID-19

Author

Listed:
  • Asger Lau Andersen
  • Emil Toft Hansen
  • Niels Johannesen
  • Adam Sheridan

Abstract

This paper uses transaction data from a large bank in Scandinavia to estimate the effect of social distancing laws on consumer spending in the COVID-19 pandemic. The analysis exploits a natural experiment to disentangle the effects of the virus and the laws aiming to contain it: Denmark and Sweden were similarly exposed to the pandemic but only Denmark imposed significant restrictions on social and economic activities. We estimate that aggregate spending dropped by around 25 percent in Sweden and, as a result of the shutdown, by 4 additional percentage points in Denmark. This implies that most of the economic contraction is caused by the virus itself and occurs regardless of social distancing laws. The age gradient in the estimates suggest that social distancing reinforces the virus-induced drop in spending for low health-risk individuals but attenuates it for high-risk individuals by lowering the overall prevalence of the virus in the society.

Suggested Citation

  • Asger Lau Andersen & Emil Toft Hansen & Niels Johannesen & Adam Sheridan, 2020. "Pandemic, Shutdown and Consumer Spending: Lessons from Scandinavian Policy Responses to COVID-19," Papers 2005.04630, arXiv.org.
  • Handle: RePEc:arx:papers:2005.04630
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    References listed on IDEAS

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    1. Juranek, Steffen & Zoutman, Floris T., 2020. "The Effect of Social Distancing Measures on Intensive Care Occupancy: Evidence on COVID-19 in Scandinavia," Discussion Papers 2020/2, Norwegian School of Economics, Department of Business and Management Science.
    2. Carvalho, Vasco M & Hansen, Stephen & Ortiz, Álvaro & Ramón García, Juan & Rodrigo, Tomasa & Rodriguez Mora, Sevi & Ruiz, José, 2020. "Tracking the COVID-19 Crisis with High-Resolution Transaction Data," CEPR Discussion Papers 14642, C.E.P.R. Discussion Papers.
    3. Veronica Guerrieri & Guido Lorenzoni & Ludwig Straub & Iván Werning, 2020. "Macroeconomic Implications of COVID-19: Can Negative Supply Shocks Cause Demand Shortages?," NBER Working Papers 26918, National Bureau of Economic Research, Inc.
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