Lights Out? COVID-19 Containment Policies and Economic Activity

This paper estimates the impact of a differential relaxation of COVID-19 containment policies on aggregate economic activity in India. Following a uniform national lockdown, the Government of India classified all districts into three zones with varying containment measures in May 2020. Using a difference-in-differences approach, the paper estimates the impact of these restrictions on nighttime light intensity, a standard high-frequency proxy for economic activity. To conduct this analysis, pandemic-era, district-level data from a range of novel sources are combined -- monthly nighttime lights from global satellites; Facebook’s mobility data from individual smartphone locations; and high-frequency, household-level survey data on income and consumption, supplemented with data from the Indian Census and the Reserve Bank of India. The analysis finds that nighttime light intensity in May was 12.4 percent lower for districts with the most severe restrictions and 1.7 percent lower for districts with intermediate restrictions, compared with districts with the least restrictions. The differences were largest in May, when the different policies were in place, and slowly tapered in June and July. Restricted mobility and lower household income are plausible channels for these results. Stricter containment measures had larger impacts in districts with greater population density of older residents, as well as more services employment and bank credit.