LAWRENCE — Beginning in 2020, most state governors ordered lockdowns and mask mandates to combat the COVID-19 pandemic. But a new study examines how the value of these actions also came with costs.
“Locking down a state is a complex, difficult decision for a governor that involves examining several tradeoffs. This is why we did not limit ourselves just to the benefit of reduction in cases of the virus,” said Sajeev Nair, assistant professor of marketing at the University of Kansas.
“We looked at metrics like GDP and unemployment, and, from a marketing point of view, things like consumer spending and customer satisfaction. So while there were benefits, there were also costs — and policymakers need to be mindful of weighing these aspects.”
His paper, titled “Lockdown Without Loss? A Natural Experiment of Net Payoffs from COVID-19 Lockdowns,” analyzes both the health and economic effects of state lockdowns. It determines this action reduced 480 infections per million consumers per day (equivalent to a reduction of 56%), yet they also reduced customer satisfaction by 2.2%, consumer spending by 7.5% and GDP by 5.4%, and increased unemployment by 2% per average state. It appears in the Journal of Public Policy and Marketing.
Co-written with Gerard Tellis of the University of Southern California, Ashish Sood of University of California-Riverside and Nitish Sood of the Medical College of Georgia, Nair’s team addressed four key issues:
1. Were lockdowns effective in reducing infections?
2. What were the costs to consumers?
3. Did lockdowns increase or reduce consumers’ mask adoption?
4. Did governors’ decisions depend on medical science or non-medical drivers?
“We thought the spread of the disease in the state would be the most important factor that would compel the governor to lock down,” Nair said. “But, surprisingly, we found that political affiliation was a more important factor. Democratic governors were twice as likely to lock down compared to Republican governors.”
Other factors such as information cascades and policy transfer or learning were also stronger predictors of governors’ decisions to impose this than disease spread. One aspect that led to the huge public misunderstanding and criticism of lockdowns followed when cases spiked immediately afterward.
“To a common man’s eye, it’s like, ‘This is not effective! Why are we locking down?’ But the surprising thing was lockdowns have a lag effect that starts kicking in in a delayed fashion due to the long incubation period of the disease,” Nair said.
Nair’s team utilized the benefit of a “natural experiment” in that some states locked down while some did not. Plus, many states implemented this at different times.
“We considered states that locked down as test units and those that didn’t or locked down later as control units. So what we’re essentially doing is comparing neighboring states that are very similar in population density, mobility, economy, income and climate factors. These states differ only in the timing of lockdowns. Then we looked at how the cases trended before and after the lockdown,” he said.
This is technically known as a difference in difference regression model (commonly used in economics and marketing), which Nair calls a “powerful and intuitive approach.”
The research also appraised the signaling effect and the substitution effect of lockdowns.
He said, “The signaling effect is when consumers really understand the severity of the problem, so they go that extra mile to take whatever practical protection steps are needed during the lockdown. At the same time, the government was messaging that wearing masks, washing hands, etc., are good ways of preventing the disease spread. The other thing we hypothesized was people would think, ‘If there is a lockdown, I’m staying at home. Why should I use masks?’ But our data is the first to show that did not happen; the lockdowns actually increased mask adoptions by consumers.”
Nair said he believed the most significant takeaway of this research is that public policy actions have huge implications for the general citizen, consumers and businesses.
“A lot of stakeholders are involved,” he said. “So how can governments, policymakers and even businesses think ahead of time and adapt to the situation? If consumers were adhering to things like mask mandates and being careful about limiting the disease’s spread, probably the painful lockdowns may not have been required.”
Having joined KU last semester, Nair studies marketing strategy issues using quantitative empirical methods, with a specific focus on new product management and online reviews.
If Nair were governor of Kansas and a new wave of COVID hit, would he order a lockdown and mask mandate?
“Our goal is to put the message out that it’s a very complicated situation," Nair said. "We are not making any policy prescriptions to any governor that if a pandemic were to happen, you have to lock down. It needs to be a decision made by weighing the costs and the benefits.”
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