Lockdowns need geographic coordination because of propagation of economic effects through supply chains

TL;DR

This study shows that geographically coordinated lockdowns can significantly reduce economic losses caused by COVID-19 restrictions, based on analysis of Japanese supply chain data.

Contribution

It provides empirical evidence that coordinated lockdowns across regions minimize GDP losses during pandemic restrictions.

Findings

Coordinated lockdowns lead to smaller GDP losses than uncoordinated ones.

Simultaneous lockdowns across regions are more effective in reducing economic impact.

Practical scenarios show nationwide coordination reduces economic damage.

Abstract

In order to prevent the spread of COVID-19, governments have often required regional or national lockdowns, which have caused extensive economic stagnation over broad areas as the shock of the lockdowns has diffused to other regions through supply chains. Using supply-chain data for 1.6 million firms in Japan, this study examines how governments can mitigate these economic losses when they are obliged to implement lockdowns. Through tests of all combinations of two-region lockdowns, we find that coordinated, i.e., simultaneous, lockdowns yield smaller GDP losses than uncoordinated lockdowns. Furthermore, we test practical scenarios in which Japan's 47 regions impose lockdowns over three months and find that GDP losses are lower if nationwide lockdowns are coordinated than if they are uncoordinated.