Optimally Controlling an Epidemic

Arbeitspapier

We propose a flexible model of infectious dynamics with a single endogenous state variable and economic choices. We characterize equilibrium, optimal outcomes, static and dynamic externalities, and prove the following: (i) A lockdown generically is followed by policies to stimulate activity. (ii) Re-infection risk lowers the activity level chosen by the government early on and, for small static externalities, implies too cautious equilibrium steady-state activity. (iii) When a cure arrives deterministically, optimal policy is dis-continuous, featuring a light/strict lockdown when the arrival date exceeds/falls short of a specific value. Calibrated to the ongoing COVID-19 pandemic the baseline model and a battery of robustness checks and extensions imply (iv) lockdowns for 3-4 months, with activity reductions by 25-40 percent, and (v) substantial welfare gains from optimal policy unless the government lacks instruments to stimulate activity after a lockdown.

Objekt anzeigen

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: CESifo Working Paper ; No. 8770

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Health: Government Policy; Regulation; Public Health
• Thema: epidemic ; lockdown ; forced opening ; SIR model ; SIS model ; SI model ; logistic model ; Covid-19

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Gonzalez-Eiras, Martín ; Niepelt, Dirk
• Ereignis: Veröffentlichung
• (wer): Center for Economic Studies and Ifo Institute (CESifo)
• (wo): Munich
• (wann): 2020

Weitere Informationen

• Handle: http://hdl.handle.net/10419/229588