April 21, 2021

The effect of the pandemic and Non-Pharmaceutical Interventions on household consumption

This background document contains more detailed evidence underpinning the points made in the box in the November forecast (CPB, 2020). As with the box, this background document asks what we can learn from the consumption response during the first wave for subsequent waves and whether non-pharmaceutical interventions (NPIs) face a trade-off between consumption and health?
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Since some NPIs involve closing certain sectors or placing supply restrictions on others, it seems intuitive that NPIs that restrict economic activity lower consumption. Indeed, compared to what would have happened without a pandemic, NPIs clearly lower consumption. However, that’s not the correct counterfactual – the correct counterfactual is what would have happened to consumption in an otherwise identical world with a pandemic but without the NPIs. Recently published cost-benefit analyses for the Netherlands (Kolen, 2020, en Frijters, 2020) assume that most or all of the consumption decline would not have happened without NPIs. This background document reviews the available evidence for this assumption. 


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