A Novel Approach for Measurement and Decomposition of the Economywide Costs of Shutting Down Tourism and Related Service Sectors Against Covid-19

Abstract

The trade-off between desirable public health outcomes and undesirable economic outcomes of anti-pandemic measures forces policy makers everywhere to seek the right combination of measures to balance the public health concerns against employment and income considerations. This article describes a novel input-output approach to assessing economywide costs of shutting down tourism and related sectors to curb the spread of COVID-19. Our framework allows for a decomposition of the total effects of shutdowns into sectoral output losses resulting from (i) suspension of the delivery of inputs to other sectors, (ii) termination of the demand for inputs produced by these sectors, and (iii) the interruption of payments to the owners of factors of production employed in the sectors ordered to shut down. We illustrate the use of this methodological framework to measure and decompose the effects of recent shutdown orders issued in Turkey, a country of major tourism activity.