Profits, Pandemics, and Lockdown Effectiveness: Theory and Evidence from Nursing Home Networks

Do the effects of government policy response to health crises differ for for-profit and not-for-profit organizations? We address this question through the lens of a two-sector continuous-time individual-based mean-field theoretical model that incorporates a non-random social network. Using unique data on nursing home networks in the United States, we calibrate the model and jointly quantify state-level lockdown effectiveness and preference for enforcing stringent containment strategies during the COVID-19 pandemic. We validate our estimated policy measures using external data. Simulations and regression-based analyses show significant interactions between lockdown effectiveness and the ownership status of a nursing home. In particular, differences in COVID-19 death rates between for-profit and not-for-profit nursing homes are driven by lockdown effectiveness.