Market size, innovation, and the economic effects of an epidemic

Domenico Ferraro and Pietro F. Peretto

Journal of Economic Behavior & Organization, 2025, vol. 236, issue C

Abstract: We develop a framework for the analysis of the economic effects of an epidemic that incorporates firm-specific innovation and endogenous entry. Transition dynamics is characterized by two differential equations describing the evolution of the mass of susceptible in the population and the ratio of the population to the mass of firms. An epidemic propagates through the economy via changes in market size that disturb incentives to enter the market and to undertake innovative activity. We evaluate state-dependent interventions involving policy rules based on tracking susceptible or infected. Simple policy rules are announced at the time of the outbreak and anchors private sector’s expectations about the time path of the intervention, including the end date. Welfare gains or losses relative to the do-nothing scenario are computed accounting for transition dynamics.

Keywords: Epidemic; Growth; Productivity; Market structure; Entry; Innovation (search for similar items in EconPapers)
JEL-codes: E23 E24 E62 O30 O40 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S016726812500232X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:236:y:2025:i:c:s016726812500232x

DOI: 10.1016/j.jebo.2025.107113

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().