Bank of Spain research traces impact of lockdown

A working paper published by the Bank of Spain examines the economic impact of the lockdown imposed by the Spanish government in response to Covid-19.

In Containment measures, employment and the spread of Covid-19 in Spanish municipalities, Eduardo Gutiérrez and Enrique Moral-Benito use municipal-level data to quantify the short-term economic effects of these measures, as well as their effectiveness in containing the pandemic.

They analyse the relationship between the firms forced to shut down in each municipality and changes in Social Security registrations, along with new Covid-19 cases in April.

“The results suggest that those municipalities most affected by the non-essential activity shutdown endured higher reductions in employment but, at the same time, they also witnessed a lower propagation of the pandemic during April,” say the researchers.

The authorities should significantly enhance testing and tracing capacity, they argue, taking into account the socioeconomic costs lockdowns cause. “Exhaustive testing and tracing would make it possible to isolate diagnosed cases and their contacts, allowing potential local outbreaks to be immediately contained,” say Gutiérrez and Moral-Benito.

Additionally, social contact between different age groups may play an important role in spreading Covid-19, the paper says. Avoiding this “could mitigate the health consequences of a possible fresh outbreak, easing the pressure on the health system and avoiding the economic costs of lockdown measures”.