Health versus Wealth: On the Distributional Effects of Controlling a Pandemic

Andrew Glover (), Jonathan Heathcote, Dirk Krueger and José-Víctor Ríos-Rull
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Andrew Glover: Federal Reserve Bank of Kansas City

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: o slow COVID-19, many countries have shut down part of the economy. Older individuals have the most to gain from slowing virus di usion. Younger workers in sectors that are shuttered have most to lose. In this paper, we build a model in which economic activity and disease progression are jointly determined. Individuals di er by age (young, retired), by sector (basic, luxury), and health status. Disease transmission occurs in the workplace, through consumption, at home, and in hospitals. We study the optimal economic mitigation policy for a government that can redistribute across individuals, but where redistribution is costly. Optimal redistribution and mitigation policies interact, and more modest shutdowns are optimal when redistribution is more costly. We find that the shutdowns that were implemented in mid-April were too extensive, but a partial shutdown should remain in place through the fall. A deeper and longer shutdown is preferred if a vaccine is imminent.

Keywords: COVID-19; Economic Policy; Redistribution (search for similar items in EconPapers)
Pages: 50 pages
Date: 2020-04-18, Revised 2020-07-21
New Economics Papers: this item is included in nep-dge, nep-hea and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (239)

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Related works:
Journal Article: Health versus wealth: On the distributional effects of controlling a pandemic (2023)
Working Paper: Health versus Wealth: On the Distributional Effects of Controlling a Pandemic (2020)
Working Paper: Health versus Wealth: On the Distributional Effects of Controlling a Pandemic (2020)
Working Paper: Health versus Wealth: On the Distributional Effects of Controlling a Pandemic (2020)
Working Paper: Health versus Wealth: On the Distributional Effects of Controlling a Pandemic (2020)
Working Paper: Health versus Wealth: On the Distributional Effects of Controlling a Pandemic (2020)
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