Sectoral Effects of Social Distancing" joint with Jean-Noël Barrot and Julien Sauvagnat

Abstract:

The health crisis caused by the outbreak of the Covid-19 virus has led many countries to implement drastic social distancing rules. By reducing the quantity of labor, social distancing in turn leads to a drop in output which is difficult to quantify without taking into account relationships between sectors. Starting from a standard model of production networks, we analyze the sectoral effects of this shock. We estimate that the US economy is producing at 83% of its capacity. One quarter of this fall in economic activity is due to the input-output network. For each sector, we characterize the overall supply and demand effect. Apart from sectors directly concerned by social distancing measures, those whose suffers the more are upstream sectors, i.e. sectors most distant from final demand. The same exercise is carried out for other European countries, taking into account national differences in sectoral composition and propensity to telework. Finally, we analyze the economic impact of selectively phasing out social distancing by sector and region and the effect of school opening.