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Epidemics and Policy: The Dismal Trade-off

Author

Listed:
  • Francesco Flaviano Russo

    (Università di Napoli Federico II and CSEF)

Abstract
I propose a stochastic SIR-Macro model to study the effects of alternative policies to cope with an epidemic. Lockdowns that order firms to close and that discontinues social activities slow down the epidemic progression at the cost of reducing GDP and increasing debt and, on average, decrease mortality. Testing strategies that identify and isolate a large number of infected but asymptomatics decrease mortality at a lower cost, but they are effective only if thorough. The more aggressive the pathogen, and the smaller the capacity of the health system, the bigger the gains from both policies. I also find that lockdowns work best in case of bigger average family size, diffused participation to the job market and bigger average workplace size.

Suggested Citation

  • Francesco Flaviano Russo, 2020. "Epidemics and Policy: The Dismal Trade-off," CSEF Working Papers 570, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  • Handle: RePEc:sef:csefwp:570
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    File URL: http://www.csef.it/WP/wp570.pdf
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    References listed on IDEAS

    as
    1. Dirk Krueger & Harald Uhlig & Taojun Xie, 2022. "Macroeconomic dynamics and reallocation in an epidemic: evaluating the ‘Swedish solution’," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 37(110), pages 341-398.
    2. Teresa Barbieri & Gaetano Basso & Sergio Scicchitano, 2022. "Italian Workers at Risk During the COVID-19 Epidemic," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 8(1), pages 175-195, March.
    3. Facundo Piguillem & Liyan Shi, 2022. "Optimal Covid-19 Quarantine and Testing Policies," The Economic Journal, Royal Economic Society, vol. 132(647), pages 2534-2562.
    4. Fernando Alvarez & David Argente, 2020. "A Simple Planning Problem for COVID-19 Lockdown," Working Papers 2020-34, Becker Friedman Institute for Research In Economics.
    5. David Berger & Kyle Herkenhoff & Chengdai Huang & Simon Mongey, 2022. "Testing and Reopening in an SEIR Model," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 43, pages 1-21, January.
    6. Goenka, Aditya & Liu, Lin & Nguyen, Manh-Hung, 2014. "Infectious diseases and economic growth," Journal of Mathematical Economics, Elsevier, vol. 50(C), pages 34-53.
    7. Collard, Fabrice & Hellwig, Christian & Assenza, Tiziana & Kankanamge, Sumudu & Dupaigne, Martial & Werquin, Nicolas & Feve, Patrick, 2020. "The Hammer and the Dance: Equilibrium and Optimal Policy during a Pandemic Crisis," CEPR Discussion Papers 14731, C.E.P.R. Discussion Papers.
    8. Andrew Atkeson, 2020. "What Will be the Economic Impact of COVID-19 in the US? Rough Estimates of Disease Scenarios," Staff Report 595, Federal Reserve Bank of Minneapolis.
    9. Callum Jones & Thomas Philippon & Venky Venkateswaran, 2021. "Optimal Mitigation Policies in a Pandemic: Social Distancing and Working from Home [A simple planning problem for covid-19 lockdown]," The Review of Financial Studies, Society for Financial Studies, vol. 34(11), pages 5188-5223.
    10. David Berger & Kyle Herkenhoff & Chengdai Huang & Simon Mongey, 2022. "Testing and Reopening in an SEIR Model," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 43, pages 1-21, January.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Lockdown; Testing; Pathogen; Pandemic;
    All these keywords.

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • I1 - Health, Education, and Welfare - - Health
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management

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