Economic and health implications of early COVID-19 lockdown exits: Evidence from a difference-in-differences analysis

The premature lifting of lockdowns during the COVID-19 pandemic created a trade-off between economic recovery and increased disease transmission, yet its true impact remains poorly understood. This study investigates the causal effect of ending lockdown policies on COVID-19 cases and deaths in Colombia, using sales tax holidays (TH) as a natural experiment. We analyze 1,105,215 observations from March 6, 2020, to December 31, 2021, using data from the Colombian Ministry of Health and Google Mobility. Applying a Difference-in-Differences approach, we find that, prior to vaccination, THs increased daily COVID-19 cases and deaths by 14 % and 4 % points, respectively, leading to net economic losses. After vaccines became available, economic gains from THs exceeded health costs. These findings underscore the trade-offs of ending lockdowns prematurely, which can have economic consequences. Policymakers can use these insights to weigh the benefits of relaxing lockdowns against health risks, emphasizing the role of vaccination and preparedness in future pandemics.