Firm behavior during an epidemic

Luiz Brotherhood and Vahagn Jerbashian

Journal of Economic Dynamics and Control, 2023, vol. 147, issue C

Abstract: We derive a model in which firms operate in an epidemic environment and internalize infections among their employees in the workplace. The model is calibrated to fit the moments of the Covid-19 epidemic. We show that firms have incentives to fight against infections and can do so very effectively by increasing teleworking and rotating employees between on-site work, teleworking, and leave. The fight against infections in firms flattens the aggregate infections curve. Subsidies to teleworking reduce infections and save lives. Subsidies to sick leave reduce the cost of sick workers and raise workplace infections. Firms delay and weaken the fight against infections during economic downturns. We also consider the problem of a government that values output and lives. We show that the government prefers to severely restrict the epidemic by tolerating short-term output losses when it has a high valuation of life.

Keywords: Aggregate infections; Covid-19; Epidemic; Firm behavior; On-site work; Policies; Rotation; Teleworking (search for similar items in EconPapers)
JEL-codes: C63 D20 D21 E10 E20 I10 I18 L23 (search for similar items in EconPapers)
Date: 2023
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Related works:
Working Paper: Firm behavior during an epidemic (2023)
Working Paper: Firm Behavior during an Epidemic (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:147:y:2023:i:c:s0165188922002974

DOI: 10.1016/j.jedc.2022.104594

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