How to design virus containment policies? A joint analysis of economic and epidemic dynamics under the COVID-19 pandemic

Alessandro Basurto, Herbert Dawid (), Philipp Harting, Jasper Hepp and Dirk Kohlweyer
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Alessandro Basurto: Bielefeld University
Herbert Dawid: Bielefeld University
Philipp Harting: Bielefeld University
Dirk Kohlweyer: Bielefeld University

Journal of Economic Interaction and Coordination, 2023, vol. 18, issue 2, No 5, 370 pages

Abstract: Abstract We analyze the impact of different designs of COVID-19-related lockdown policies on economic loss and mortality using a micro-level simulation model, which combines a multi-sectoral closed economy with an epidemic transmission model. In particular, the model captures explicitly the (stochastic) effect of interactions between heterogeneous agents during different economic activities on virus transmissions. The empirical validity of the model is established using data on economic and pandemic dynamics in Germany in the first 6 months after the COVID-19 outbreak. We show that a policy-inducing switch between a strict lockdown and a full opening-up of economic activity based on a high incidence threshold is strictly dominated by alternative policies, which are based on a low incidence threshold combined with a light lockdown with weak restrictions of economic activity or even a continuous weak lockdown. Furthermore, also the ex ante variance of the economic loss suffered during the pandemic is substantially lower under these policies. Keeping the other policy parameters fixed, a variation of the consumption restrictions during the lockdown induces a trade-off between GDP loss and mortality. Furthermore, we study the robustness of these findings with respect to alternative pandemic scenarios and examine the optimal timing of lifting containment measures in light of a vaccination rollout in the population.

Keywords: COVID-19; Economic loss; Containment policy; Variance of policy effects; Agent-based modeling (search for similar items in EconPapers)
JEL-codes: C63 E17 H12 I18 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s11403-022-00369-2

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