The macroeconomics of age-varying epidemics

Marta Giagheddu and Andrea Papetti

European Economic Review, 2023, vol. 151, issue C

Abstract: We incorporate age-specific socio-economic interactions in a SIR macroeconomic model to study the role of demographic factors for the COVID-19 epidemic evolution, its macroeconomic effects and possible containment measures. We capture the endogenous response of rational individuals who choose to reduce inter- and intra-generational social interactions, consumption- and labor-related personal exposure to the virus, while not internalizing the impact of their actions on others. We find that social distancing measures targeted to the elderly (who face higher mortality risk and are not part of the labor force) are best suited to save lives and mitigate output losses. The optimal economic shutdown generates small gains in terms of lives saved and large output losses, for any given type of social distancing. These results are confirmed by calibrating the model to match real epidemic and economic data in the context of a scenario exercise.

Keywords: Epidemic; COVID-19; Recessions; Demographics; Age differences; Vaccine; Containment policies; SIR macro model (search for similar items in EconPapers)
JEL-codes: E1 H0 I1 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:151:y:2023:i:c:s0014292122002264

DOI: 10.1016/j.euroecorev.2022.104346

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