Diffusion of COVID-19 in Social and Production Networks: Simulation Evidence from a Dynamic Model

Victor Aguirregabiria (), Jiaying Gu, Yao Luo and Pedro Mira

Annals of Economics and Statistics, 2021, issue 142, 179-210

Abstract: This paper presents a dynamic model to evaluate economic and public health effects of the diffusion of COVID-19. Our framework combines a SIR epidemiological model of virus diffusion with a dynamic game of network production and social interactions. The economy comprises three types of geographic locations: homes, workplaces, and consumption places. Each individual has her own set of locations where she develops her life. The combination of these sets for all the individuals determines the economy's production and social network. Every day, individuals choose to work and consume either outside (with physical interaction with other people) or remotely (from home, without physical interactions). Working (and consuming) outside is more productive and generates stronger complementarities (positive externality). However, in the presence of a virus, working outside facilitates infection and the diffusion of the virus (negative externality). Individuals are forward-looking. We calibrate the model and implement numerical experiments to evaluate the health and economic impact of several counterfactual public policies: subsidies for working at home; testing policies; herd immunity; and changes in the network structure. These policies generate substantial differences in the propagation of the virus and its economic impact.

Keywords: Virus Diffusion; Dynamics; Production and Social Networks; Production Externalities; Public Health (search for similar items in EconPapers)
JEL-codes: C57 C73 I18 L14 L23 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:2021:i:142:p:179-210

DOI: 10.15609/annaeconstat2009.142.0179

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