Category Archives: RiskSpillover

4/2/21: The Impact of the Business Closures on Covid-19 Infection Rates

 In a recent post, I covered the impact of the failure at the Federal level to implement more robust measures on rents and tenure security for households (see: Another interesting aspect of the U.S. experience during the pandemic relates to the policies concerning the closure of essential vs non-essential businesses. A recent (January 2021) study by Song, Hummy and McKenna, Ryan and Chen, Angela T. and David, Guy and Smith-McLallen, Aaron, titled: "The Impact of the Non-Essential Business Closure Policy on Covid-19 Infection Rates" (NBER Working Paper No. w28374: looked at the implications of this specific policy response to the Covid-19 pandemic.

Per authors, durig the pandemic, "many localities instituted non-essential business closure orders, keeping individuals categorized as essential workers at the frontlines while sending their non-essential counterparts home". The authors examined "the extent to which being designated as an essential or non-essential worker impacts one’s risk of being Covid-positive following the non-essential business closure order". The study used data for the State of Pennsylvania, accounting for the intra-household transmission risk experienced by the workers' cohabiting family members and roommates. 

The study estimated that:

  • "... workers designated as essential have a 55% higher likelihood of being positive for Covid-19 than those classified as non-essential; in other words, non-essential workers experience a protective effect. 
  • "While members of the health care and social assistance sub-sector contribute significantly to this overall effect, it is not completely driven by them. 
  • "We also find evidence of intra-household transmission that differs in intensity by essential status. Dependents cohabiting with an essential worker have a 17% higher likelihood of being Covid-positive compared to those cohabiting with a non-essential worker. Roommates cohabiting with an essential worker experience a 38% increase in likelihood of being Covid-positive. 
  • Overall, "analysis of households with a Covid-positive member suggests that intrahousehold transmission is an important mechanism."
In summary: "Our findings suggest that essential workers and their cohabitants (whether dependents or other primary policyholders sharing the same address) are at substantially higher risk of being positive for Covid-19 than are non-essential workers and their cohabitants. Conversely, non-essential workers and their cohabitants experience a protective effect against the risk of Covid-19 infection as a result of the nonessential business closure policy." 

And the kicker: "the designation of some workers as essential and others as non-essential during the pandemic has increased the health risk profile of some jobs while reducing it for others, all while other underlying aspects of these jobs (e.g., monetary compensation) remain minimally affected." In other words, the essential workers carry risk without carrying associated risk premium in their compensation (monetary or non-monetary).