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Network Exposure in the Propagation of the COVID-19 Pandemic

Author

Listed:
  • Epp, Markus
  • Jäger, Marius
Abstract
This paper develops a parsimonious model of individual exposure and of public health policy that can be used to study the evolution of an epidemic and the optimal use of lockdown policies and other non-pharmaceutical interventions. At the heart of individual exposure choices are the trade-offs between private utility derived from exposure and the risks of infection. Agents' utilities from private exposure are amplified by network benefits from social and economic activities, which amplifies the infection externality and constitutes a role for coordination policies due to multiple equilibria. We find that lockdowns do not prevail endogenously in equilibrium and that containment policy can significantly enhance welfare. Unpopularity of such contact restrictions imply that policy might face time inconsistency problems.

Suggested Citation

  • Epp, Markus & Jäger, Marius, 2021. "Network Exposure in the Propagation of the COVID-19 Pandemic," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242465, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc21:242465
    as

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    File URL: https://www.econstor.eu/bitstream/10419/242465/1/vfs-2021-pid-50662.pdf
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    References listed on IDEAS

    as
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    8. Toxvaerd, F.M.O, 2020. "Equilibrium Social Distancing," Cambridge Working Papers in Economics 2021, Faculty of Economics, University of Cambridge.
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    More about this item

    Keywords

    Pandemics; Endogenous exposure; SIR-macro; Network effects; Externality; Time inconsistency;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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