Mobility and Consumption Choices during the COVID-19 Pandemic

How does the risk of COVID-19 infection affect agents’ economic choices? This paper sheds light on this issue by analyzing how people’s retail and recreation mobility, a high-frequency proxy for consumption and economic activity, responded to the diffusion of COVID-19 during the early stage of the first wave. COVID-19 affected people’s choices directly, through voluntary distancing, and indirectly, through government responses, such as the introduction of mandatory closures and nationwide stay-at-home orders, which impede people from moving. Obtaining accurate estimates of the two effects requires disentangling the two channels. We propose a simple yet novel identification strategy based on the unique peculiarities of the first COVID-19 wave. We exploit the timing gap between the first reported case and the “unanticipated” implementation of mandatory restrictions and the variability of these events in the European context to show that a 1% increase in daily cases reduced mobility by approximately 0,02%. This result suggests that the epidemic strongly affects household spending and economic activity, even without mandatory mobility restrictions.