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Information and Inequality in the Time of a Pandemic

Allan Dizioli and Roberto Pinheiro ()

No 202025, Working Papers from Federal Reserve Bank of Cleveland

Abstract: We introduce two types of agent heterogeneity in a calibrated epidemiological search model. First, some agents cannot afford to stay home to minimize virus exposure. Our results show that poor agents bear most of the epidemic’s health costs. Furthermore, we show that when a larger share of agents fail to change their behavior during the epidemic, a deeper recession is possible. Second, agents develop symptoms heterogeneously. We show that for diseases with a higher share of asymptomatic cases, even when less lethal, health and economic outcomes are worse. Public policies such as testing, quarantining, and lockdowns are particularly beneficial in economies with larger shares of poor agents. However, lockdowns lose effectiveness when a larger share of the agents take voluntary precautions to minimize virus exposure independent of the lockdown.

Keywords: COVID-19 (search for similar items in EconPapers)
JEL-codes: E17 D62 I12 I14 J22 (search for similar items in EconPapers)
Pages: 48
Date: 2020-08-17
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DOI: 10.26509/frbc-wp-202025

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