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Between Lives and Economy: Optimal COVID-19 Containment Policy in Open Economies

Wen-Tai Hsu (), Hsuan-Chih Lin () and Han Yang ()
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Han Yang: Institute of Economics, Academia Sinica

No 20-2020, Economics and Statistics Working Papers from Singapore Management University, School of Economics

Abstract: This paper studies optimal containment policy for combating a pandemic in an open-economy context. It does so via quantitative analyses using a model that incorporates a standard epidemiological compartmental model in a multi-country, multi-sector Ricardian model of international trade with full-fledged input-output linkages. We devise a novel approach in computing optimal national policies in the long run, and contrast these policies with a baseline in which countries maintain their current policies until vaccine availability. The welfare gains under optimal policies are asymmetric as the gains for the set of countries which should tighten up the containment measures are much larger than those which should relax. We also find that the welfare implications of optimal policies in open economies differ significantly from those in closed ones.

Keywords: COVID-19; pandemic; welfare analysis; containment policy; optimal policy; open economy; trade; input-output linkages (search for similar items in EconPapers)
JEL-codes: E27 F11 F40 I18 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2020-10-05
New Economics Papers: this item is included in nep-hea, nep-int and nep-mac
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