- The Geography of Pandemic Containment
Bank of Canada
Interconnectedness through trade and mobility across regions within countries is a pillar of modern economies. The COVID-19 pandemic has challenged this long-standing paradigm. Concerns are rising that interconnectedness increases the spread of the virus and reduces the effects of policies to contain it. In response, some policy-makers have pushed to limit the movement of goods and individuals across states.
In this paper, we examine how interconnectedness affects the pandemic and consider the optimal containment policies regulating movement within and between states. To this end, we analyze three sets of policies that aim at minimizing or mitigating welfare losses:
- within state policies (these policies do not restrict movement of people or goods across states)
- between state policies (these policies do restrict movement people or goods across states)
- a policy that combines the two above
Our findings provide three main takeaways:
1. Local lockdown policies mitigate the pandemic more effectively than national ones. This is mainly because they have more flexibility in the timing of lockdowns.
2. A policy that restricts trade and mobility across states mitigates welfare losses, but it doesn’t significantly reduce the total death toll. This suggests that, given the internal spread of the virus, limiting between-state mobility alone is not able to mitigate the pandemic.
3. Combining local lockdowns and travel restrictions is the most effective policy.