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An Economic Model of Health-vs-Wealth Prioritization During COVID-19: Optimal Lockdown, Network Centrality, and Segregation

Roland Pongou (), Guy Tchuente () and Jean-Baptiste Tondji ()

No 521, National Institute of Economic and Social Research (NIESR) Discussion Papers from National Institute of Economic and Social Research

Abstract: We address the problem of finding the optimal lockdown and reopening policy during a pandemic like COVID-19, for a social planner who prioritizes health over short-term wealth accumulation. Agents are connected through a fuzzy network of contacts, and the planner's objective is to determine the policy that contains the spread of infection below a tolerable incidence level, and that maximizes the present discounted value of real income, in that order of priority. We show theoretically that the planner's problem has a unique solution. The optimal policy depends both on the configuration of the contact network and the tolerated infection incidence. Using simulations, we apply these theoretical findings to: (i) quantify the trade-off between the economic cost of the pandemic and the infection incidence allowed by the social planner, and show how this trade-off depends on network configuration; (ii) understand the correlation between different measures of network centrality and individual lockdown probability, and derive implications for the optimal design of surveys on social distancing behavior and network structure; and (iii) analyze how segregation induces differential health and economic dynamics in minority and majority populations, also illustrating the crucial role of patient zero in these dynamics.

Keywords: COVID-19; health-vs-wealth prioritization; economic cost; fuzzy networks; net-work centrality; segregation; patient zero; optimally targeted lockdown policy (search for similar items in EconPapers)
JEL-codes: D85 E61 H12 I18 J15 (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-mac and nep-net
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Related works:
Working Paper: An Economic Model of Health-vs-Wealth Prioritization During COVID-19: Optimal Lockdown, Network Centrality, and Segregation (2020) Downloads
Working Paper: An Economic Model of Health-vs-Wealth Prioritization during Covid-19: Optimal Lockdown, Network Centrality, and Segregation (2020) Downloads
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