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Individual welfare costs of stay-at-home orders

In a new paper, SSE-CERN network members Erik Wengström and Ola Andersson with co-authors estimate that a one-month stay-at-home order would give a welfare loss of around 9 percent of Sweden's monthly GDP.

The paper reports the results from a choice experiment on a representative sample of the Swedish population. To get a welfare estimate, willingness to accept a stay-at-home order that "only" limits non-working hours away from home is measured. The monetary compensation, the length of the order, and the number of hours allowed away from home is varied.

Weekly costs vary greatly depending on policy strictness. Lenient policies are much less costly than strict ones, suggesting that very strict policies (as in China, Italy, and Spain) are only cost-effective if they reduce the spread of the virus much more than more lenient ones.

The average weekly compensation required for a one-month policy that allows for 8 hours a week outside is 120 USD per week or 480 USD in total. If adopted in Sweden, this is equivalent to 9.1% of the monthly GDP. To put in a rough perspective, this corresponds to around 30,000 QALYs (or 3,700-8,000 COVID-19 fatalities). 

Link to paper: https://project.nek.lu.se/publications/workpap/papers/wp20_9.pdf

Erik Wengström, Department of Economics, Lund University

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