Science & research / Evaluation and performance
Examining the health and economic trade-offs of business types reopening
By Andrew Sansom | 18 Jun 2020 | 0
Researchers from the Massachusetts Institute of Technology (MIT) have published a study examining which types of businesses should be open or closed during the COVID-19 crisis.
The COVID-19 crisis has resulted in some businesses shutting up shop, while others have stayed open. But which places represent the best and worst trade-offs, in terms of the economic benefits and health risks?
The new study uses a variety of data on consumer and business activity to tackle that question, measuring 26 types of businesses by both their usefulness and risk. Vital forms of commerce that are relatively uncrowded and produce fewer health risks fare best in the study; unsurprisingly, less significant types of businesses, including those that generate crowds, perform worse. The results could help inform the policy decisions of government officials during the ongoing pandemic.
Owing to their economically significant status and being relatively uncrowded environments, banks perform the best in the study – ranking first in economic importance, out of the 26 business types, but just 14th in risk.
“Banks have an outsize economic impact and tend to be bigger spaces that people visit only once in a while,” says Seth G Benzell, a postdoc at the MIT Initiative on the Digital Economy (IDE) and co-author of a paper describing the study.
By contrast, other business types attract larger crowds while having far less economic importance. These include liquor and tobacco stores; sporting goods stores; cafes, juice bars and dessert parlours; and gyms. All of those are in the bottom half of the study’s rankings of economic importance. At the same time, cafes, juice bars and dessert parlours, taken together, rank third-highest in risk out of the 26 business types, while gyms are the fifth-riskiest according to the study’s metrics – which include mobile phone location data revealing how crowded US businesses get.
“Policy makers have not been making clear explanations about how they are coming to their decisions,” says Avinash Collis PhD, an MIT-trained economist and co-author of the new paper. “That’s why we wanted to provide a more data-driven policy guide.”
And if the COVID-19 pandemic worsens again, the research can be used to decide which businesses should be closed.
“This is not only about which locations should reopen first,” says Christos Nicolaides PhD, a digital fellow at the IDE and study co-author. “You can also look at it from the perspective of which locations should close first, in another future wave of COVID-19.”
The research team examined anonymised location data from 47 million mobile phones, from January 2019 through March 2020. The data included visits to 6 million distinct business venues in the US. The 26 types of businesses in the study accounted for 57 per cent of those visits, meaning the study covers a broad swathe of the economy.
By examining the location data over an extended period, the scholars were able to determine what the typical crowding level is for all business types in the study.
The study also used payroll, revenue, and employment data from US Census Bureau to rate the importance of different industries to the economy. Businesses in the study represented 1.43 million firms, 32 million employees, $1.1 trillion in payroll, and $5.6 trillion in revenues. The researchers also included a survey of 1099 people to gauge public preferences about different types of business.
The researchers recognised that during the pandemic, many consumers have been trying to limit trips that generate interaction with strangers, while still needing to get essential transactions done.
Benzell notes: “The idea was, how can we think about rationing social contacts in a way that gives us the most bang for our buck, in terms of meetings, while keeping the risk of COVID transmission as low as possible?”
The study also rates risk on the basis of aggregate public exposure, per business type. While spending a couple of hours in a cinema with strangers might seem quite risky, sit-down restaurants would likely generate much more total transmission of COVID-19. In February this year, for example, cinemas received about 17.6 million consumer visits in the US, whereas sit-down restaurants had almost 900 million visits.
“It’s not danger per visit but it’s a cumulative danger,” Nicolaides explains. “If you look at movie theatres, they seem dangerous, but not that many people go to the movies every day . . . and restaurants are a good counter-example.”
Liquor stores and higher education
In many cases, the researchers say, policy makers have made reasonable decisions about which types of businesses should be open and closed. But liquor stores, which have been deemed an “essential” business in many US states, are an outlier. In the study, liquor stores rate 20th out of the 26 business types in economic importance, and 12th highest in risk.
“Most states have allowed liquor stores to remain open,” Benzell says. “This is a bit of a bad call from our perspective, because liquor stores don’t create a lot of social value. If you ask people which stores they want to be open, liquor stores are near the bottom of that list. They don’t have that many receipts or employees, and they tend to be these small, crowded places where people are up against each other trying to navigate.”
The researchers are optimistic about the public health dynamics of colleges and universities, which they rank eighth in economic importance but just 17th in terms of risk.
“Colleges and universities actually have the potential to offer pretty good social contact trade-offs,” Benzell says. “They tend to be places with big campuses, they tend to be [composed of] consistently the same group of young people, visiting the same places.
“When people are worried about colleges and universities, they’re mostly worried about dormitories and parties, people getting infected that way, and that’s fair enough. But [for] research and teaching, these are big spaces, with pretty modest groups of people that produce a lot of economic and social value.”
The scholars note that the study contains national ratings and acknowledge that there might be some regional variation. That said, the study did not indicate significantly different results for urban and rural settings, an issue the researchers evaluated.
Some businesses are adapting to the pandemic by using new protocols or safety measures, such as limited customers in hair salons or safety partitions at supermarket checkout counters. Studying business venues with such safety measures in place would also be valuable, the researchers note.
“Moving forward, an interesting exercise would be to see how dangerous these locations are once you implement these mitigation strategies.” Collis says. “Those are all interesting open questions, seeing which business adapt. And some of these adaptations will probably be temporary changes but other business practices may stick in the COVID age.”
The paper, ‘Rationing social contact during the COVID-19 pandemic: transmission risk and social benefits of US location’, appears in Proceedings of the National Academy of Science. Research support was provided by MIT’s Initiative on the Digital Economy.