Using a Natural Experiment to Assess the Costs and Benefits of Intensifying Social Isolation

State decree nº 55.184 of April 15, 2020 gave discretionary power to the municipalities of the Brazilian state of Rio Grande do Sul to adopt or abolish restrictive measures to economic activities, in particular, related to the retail of goods and services with face-to-face customer service. This article uses the natural experiment created by this decree to evaluate the costs and benefits of intensifying social isolation. For this goal, it uses sales information with electronic invoices and COVID-19 recorded cases and deaths to estimate models of difference in differences with weekly panel data from March 22 to May 16, 2020. The results show that the economic costs of intensifying social isolation were around BRL 844 thousand per day, while the benefits reducing cases and deaths by COVID-19 were not statistically significant. Furthermore, it appears that the benefits of intensifying social isolation could only be achieved under specific circumstances, but with high economic costs. The estimated costs to avoid an additional case of COVID-19 were 194 times the cost of an ICU stay and about 900 times the cost in a non-ICU stay. Besides, each life saved cost about BRL 221.62 million, about 56 times the estimated value of statistical life for Brazil. Therefore, the article concludes that the economic costs of intensifying social isolation are relevant and consistent, while their benefits are small and uncertain