The sooner, the better: The economic impact of non‐pharmaceutical interventions during the early stage of the COVID‐19 pandemic

This paper estimates the economic impact of the non‐pharmaceutical interventions (NPIs) implemented by countries in Europe and Central Asia during the initial stages of the COVID‐19 pandemic. The analysis relies on daily electricity consumption, nitrogen dioxide emission and mobility records to trace the economic disruptions caused by the pandemic and calibrate these measures to estimate the magnitude of the economic impact. To address the potential endogeneity in the introduction of NPIs, we instrument their stringency by the extent of a country's social ties to China. The results suggest that the NPIs led to a decline of about 10% in economic activity across the region. On average, countries that implemented non‐pharmaceutical interventions in the early stages of the pandemic appear to have better short‐term economic outcomes and lower cumulative mortality, compared with countries that imposed non‐pharmaceutical interventions during the later stages of the pandemic. Moreover, there is evidence that COVID‐19 mortality at the peak of the local outbreak has been lower in countries that acted earlier. In this sense, the results suggest that the sooner non‐pharmaceutical interventions are implemented, the better are the economic and health outcomes.