COVID-19, the effect of lockdowns on retail expenditure and displacement effects on the regional economy

Abstract

The COVID-19 pandemic is exerting ongoing economic effects on communities locally and globally. Government responses to the ongoing crisis range from mere social distancing recommendations to lockdowns. In New Zealand, a strict lockdown regime was implemented for a 7-week period during which public activity was restricted and shopping limited to the nearest supermarket or pharmacy. During this period, overall retail spending declined substantially. This study employs a multi-region input-output (MRIO) model to investigate the impact of this reduced activity from an urban population on the wider-regional economy. The results reveal that the change in consumer spending and displacement has spilled over into the adjacent economies resulted in a shift in the regional economic landscape. Moreover, our results suggest that the effects of withheld spending during the lockdown propagate unevenly across retail sectors and beyond administrative boundaries once lockdown is lifted. Although millions of dollars remain unspent, the accelerated pace of consumer spending after lockdown reveals a shift from previous large-scale global shocks.