Economics and Epidemics: Evidence from an Estimated Spatial Econ-SIR Model

Mark Bognanni (), Douglas Hanley, Daniel Kolliner () and Kurt Mitman
Additional contact information
Mark Bognanni: Federal Reserve Board of Governors
Daniel Kolliner: University of Maryland

No 13797, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Economic analysis of effective policies for managing epidemics requires an integrated economic and epidemiological approach. We develop and estimate a spatial, micro-founded model of the joint evolution of economic variables and the spread of an epidemic. We empirically discipline the model using new U.S. county-level data on health, mobility, employment outcomes, and non-pharmaceutical interventions (NPIs) at a daily frequency. Absent policy or medical interventions, the model predicts an initial period of exponential growth in new cases, followed by a protracted period of roughly constant case levels and reduced economic activity. Nevertheless, if vaccine development proved impossible, and suppression cannot entirely eradicate the disease, a utilitarian policymaker cannot improve significantly over the laissez-faire equilibrium by using lockdowns. Conversely, if a vaccine will arrive within two years, NPIs can improve upon the laissez-faire outcome by dramatically decreasing the number of infectious agents and keeping infections low until vaccine arrival. Mitigation measures that reduce viral transmission (e.g., mask-wearing) both reduce the virus's spread and increase economic activity.

Keywords: epidemics; economic policy; COVID-19; Econ-SIR (search for similar items in EconPapers)
JEL-codes: E1 H0 I18 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2020-10
New Economics Papers: this item is included in nep-hea and nep-mac
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Citations: View citations in EconPapers (27)

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Related works:
Working Paper: Economics and Epidemics: Evidence from an Estimated Spatial Econ-SIR Model (2020)
Working Paper: Economics and Epidemics: Evidence from an Estimated Spatial Econ-SIR Model (2020)
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