COVID-19 and the Welfare Effects of Reducing Contagion

Robert Pindyck

No 27121, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: I use a simple SIR model, augmented to include deaths, to elucidate how pandemic progression is affected by the control of contagion, and examine the key trade-offs that underlie policy design. I illustrate how the cost of reducing the "reproduction number" R0 depends on how it changes the infection rate, the total and incremental number of deaths, the duration of the pandemic, and the possibility and impact of a second wave. Reducing R0 reduces the number of deaths, but extends the duration (and hence economic cost) of the pandemic, and it increases the fraction of the population still susceptible at the end, raising the possibility of a second wave. The benefit of reducing R0 is largely lives saved, and the incremental number of lives saved rises as R0 is reduced. But using a VSL estimate to value those lives is problematic.

JEL-codes: C02 H12 I10 (search for similar items in EconPapers)
Date: 2020-05
New Economics Papers: this item is included in nep-hea
Note: EEE EFG EH PE PR
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Citations: View citations in EconPapers (50)

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