$700bn Lost in Market Value but 36,000 Lives Saved - Bocconi Uni Study on COVID-19 and Impact of Closing Businesses in the US
MILAN, May 27, 2020
The costs and benefits of mandated business closures in the US in March and April according to a study by two Bocconi University professors: 700 billion dollars in loss of market value but 36,000 lives saved
MILAN, May 27, 2020 /PRNewswire/ -- Around the world the typical government response to combat the COVID-19 pandemic has been social distancing measures with connected state mandated non-essential business closures. And the trade off in terms of costs, for economic output, and benefits, for public health, of such measures has been the source of much debate.
Two Bocconi University professors, Basile Grassi and Julien Sauvagnat, and one from HEC Paris, Jean-Noël Barrot, have carried out a study which estimates that in the US in March and April 2020 such measures have led to a cost of $700 billion lost in market value but the saving of 36,000 lives.
The authors first read US states executive orders on mandated closures and compiled the list of non-essential businesses. They then combined these with the share of work from home to construct the share of restricted labor. In a second stage, they estimated the impact of labor restriction measure on firms' market value – finding that a 10% increase in the share of restricted labor leads to almost a 1.9% decline in firms' market value. They then moved on to analyzing the effect on health outcomes - finding that a 10% increase in share of restricted labor leads to a 0.15% decrease in the rate of COVID-19 infections, and a 0.01% in the mortality rate.
"Applying these coefficients to the total market value of public companies in the US suggests that the 10% increase in the share of labor restricted by state-mandated business closures leads to a loss of $700 billion in market value. Whilst applying these coefficients to the US population, we find that it leads to a decline in the death count by approximately 36,000," the authors state.
The study is one of the research projects of Bocconi University's new Covid Crisis Lab, Laboratory for Coronavirus Crisis Research. An interdisciplinary centre that brings together over 30 social sciences researchers studying the impact of the pandemic in the areas of Health; Economy, Finance & Business; Society and the Legal System.
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SOURCE Bocconi University