Optimal social distancing in SIR based macroeconomic models

Yoseph Getachew

No 2020-034, MERIT Working Papers from United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT)

Abstract: The paper introduces voluntary social distancing to the canonical epidemiology model, integrated into a conventional macroeconomic model. The model is extended to include treatment, vaccination, and government-enforced lockdown. Infection-averse individuals face a trade-off between a costly social distancing and the risk of getting infected and losing next-period labour income. We find an individual's social distancing is proportional to the welfare loss she incurs when moving to the infected compartment. It increases in the individual's psychological discount factor but decreases in the probability of receiving a vaccination. Quantitatively, a laissez-faire social distancing flattens the infection curve that minimizes the economic damage of the epidemic. A government-enforced social distancing is more effective in flattening the infection curve but has a detrimental effect on the economy.

Keywords: COVID-19; corona virus; pandemic; lockdown; social distancing; macroeconomics; epidemics (search for similar items in EconPapers)
JEL-codes: E19 H20 I19 (search for similar items in EconPapers)
Date: 2020-08-04
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Optimal Social Distancing in SIR based Macroeconomic Models (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:unm:unumer:2020034

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