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Sweden's COVID-19 approach created limited economic benefits: Study

University of Copenhagen Researcher Adam Sheridan joins Yahoo's Zack Guzman to discuss his new research which reveals Sweden's approach to the coronavirus created limited economic benefits for the country.

Video Transcript

ZACK GUZMAN: As we've seen countries around the world taking different approaches to handling the COVID-19 pandemic, very interesting research is coming out of the University of Copenhagen comparing two very different strategies there. And it's sparking a discussion back here in the United States too when we think about governors maybe shutting down again or not shutting down again.

And we just want to highlight some of the data coming out of that report. It looks at Sweden and Denmark, two countries that took notably different approaches to curtailing the pandemic. Sweden, unlike most other countries in Europe, didn't actually go into lockdown. They kept schools, restaurants, and everything else open there. Involuntary social distancing.

But the new study from University of Copenhagen points out that consumer spending in Sweden fell only 4 percentage points less than neighboring Denmark, which took a very different approach. So here to discuss that with us is one of the researchers tied to that. Adam Sheridan is here with us now.

And Adam, when we look at it, I mean, I guess this is kind of at the heart of what we were having in the discussion here in that, is it really shutting down that's keeping Americans at home or is it the fear of the virus? What did you find?

ADAM SHERIDAN: Hey, Zack. Thanks for having me. So yeah, I think the bottom line of this research is that allowing private businesses to stay open during this pandemic does not save the economy. So in fact, there seems to be very limited economic benefits from staying open.

As you mentioned, unlike almost every other country, Sweden took what you might call a light-touch approach, keeping restaurants, schools, and shops open and leaving it to individuals themselves to make their own decisions about social distancing, whereas Denmark took what is a much more conventional approach of introducing social distancing laws that closed down a lot of private businesses.

And by comparing consumer spending in these countries around the time at which Denmark shut down, we can see that there's just a massive drop in consumer spending in both countries. And given what we know about this being a big part of GDP, it's really important for the economy. And it suggests that really, the virus itself is responsible for the majority of the economic declines that we've seen throughout this period.

ZACK GUZMAN: Yeah. And it's important to raise here too, I mean, when we're comparing the economic impact of all this, Sweden still recorded its largest GDP drop since 1980 in it. But when you think about it, you know, economists were trained to think on the margin here.

And what you get out of doing something like this is not just a dollar cost. Of course, we're dealing with lives here as well. And noting, Sweden has a much higher mortality rate than the other countries in Europe, with the amount of deaths as of last week close to 6,000 in Sweden and 616 in Denmark.

So you see the impact of their health statistics there. So how does that play into, I guess, trying to figure out what strategy might be best?

ADAM SHERIDAN: Certainly. So I think it's-- so it's not something we go into in the paper in so much detail. But one can really compare this very small economic cost to the Danish shutdown to these very large differences in mortality.

So as you mentioned, around nine times more people have lost their lives to COVID-19 in Sweden compared to Denmark, likely because Sweden allowed people to continue going out, spending money, and interacting. And so these estimates really suggest that you lose very little extra spending in the economy for each extra life that you can save from social distancing laws.

And that's an important consideration for lots of countries, especially now. Countries that have remained open who might consider closing, or countries like Denmark, where cases are actually rising again. So this is important for the calculus of what to do next.

ZACK GUZMAN: Yeah. I mean, obviously, we're approaching the fall and winter seasons here, when a lot of this is going to be closely watched. And a lot of concerns that we might see another wave, similar to what we saw first hit New York here in the US.

So on that front, what do you think would be the main takeaways here as we've seen it kind of be a piecemeal strategy, states doing things on their own, versus what we've seen in other European countries where it's a national approach, everyone's very much working in the same direction here? So what's your advice to maybe governors or presidents, if you would apply your data?

ADAM SHERIDAN: I think that the main takeaway from this study and some other studies from the US is, again, that kind of fear of the virus, personal health concerns are really, really important; that by eradicating the virus or reducing its spread, you can make people much more comfortable with going out and spending.

And based on these findings, there is potentially a lot of merit to certain policy proposals that would advocate for, for example, nationwide lockdowns for short periods of time that could bring the virus to very low levels. And that might even have a short-term economic benefit, especially for certain groups-- for example, the elderly-- who, with the virus spreading so widely, may be actually cutting back spending a lot more without social distancing laws than they would with.

ZACK GUZMAN: Yeah, no, and it's very interesting too when you think about the elderly here in this country and how they are much more prone to actually go to the ballot box, all this playing out in an election year as well. But Adam Sheridan, the University of Copenhagen, appreciate you taking the time to chat with us.

ADAM SHERIDAN: Thank you.