On the Dynamic Interdependency of Unemployment and COVID-19 Deaths

Abstract

Using monthly data from U.S. counties, this paper offers evidence that rising COVID-19-related deaths appear to lead to reduced economic activity, but that reduced economic activity, in turn, helps to achieve its stated purpose: reducing subsequent deaths. Using a dynamic panel seemingly-unrelated regression model, the paper estimates that a one percentage point increase in the unemployment rate leads to approximately 3,300 fewer COVID-19-related deaths nationally in the subsequent month. From a policy perspective, that finding offers suggestive evidence that lockdowns (and other restrictions), while economically painful, appear to be effective at reducing subsequent deaths.