Private versus Social Responses to a Pandemic

Miguel Casares, Paul Gomme and Hashmat Khan ()

No 24002, Working Papers from Concordia University, Department of Economics

Abstract: What are the socially optimal restrictions on private activity during a pandemic? How do these differ from private decisions? We address these questions by modeling the interactions between epidemiology and the macroeconomy. Unlike the private planner, the social planner accounts for two externalities: the increase in the cost of severe illness associated with more infected individuals, reflecting the capacity constraints of the health care system; and the socioeconomic transmission of the virus from asymptomatic to susceptible individuals. Owing to these externalities, the social planner imposes stricter constraints on socioeconomic activities. Applied to the COVID-19 pandemic, socially optimal restrictions reduce the welfare costs by roughly one percent of GDP.

Keywords: epi-macro; socioeconomic contacts; externality (search for similar items in EconPapers)
JEL-codes: E11 E13 E61 I18 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2024-06-18
New Economics Papers: this item is included in nep-hea
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Persistent link: https://EconPapers.repec.org/RePEc:crd:wpaper:24002

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