The Macroeconomics of Epidemics

Rebelo, Sérgio, Martin Eichenbaum and Mathias Trabandt

No 14520, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We extend the canonical epidemiology model to study the interaction between economic decisions and epidemics. Our model implies that people's decision to cut back on consumption and work reduces the severity of the epidemic, as measured by total deaths. These decisions exacerbate the size of the recession caused by the epidemic. The competitive equilibrium is not socially optimal because infected people do not fully internalize the effect of their economic decisions on the spread of the virus. In our benchmark model, the best simple containment policy increases the severity of the recession but saves roughly half a million lives in the U.S.

Keywords: Epidemic; Covid-19; Recessions; Containment policies (search for similar items in EconPapers)
JEL-codes: E1 H0 I1 (search for similar items in EconPapers)
Date: 2020-03
New Economics Papers: this item is included in nep-dem and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (689)

Downloads: (external link)
https://cepr.org/publications/DP14520 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: The Macroeconomics of Epidemics (2021)
Working Paper: The Macroeconomics of Epidemics (2020)
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:cpr:ceprdp:14520

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP14520
orders@cepr.org

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by (repec@cepr.org).