Working Paper: CEPR ID: DP14688
Authors: Martin Eichenbaum; Sergio Rebelo; Mathias Trabandt
Abstract: We develop a SIR-based macroeconomic model to study the impact of testing/quarantining and social distancing/mask use on health and economic outcomes. These policies can dramatically reduce the costs of an epidemic. Absent testing/quarantining, the main effect of social distancing and mask use on health outcomes is to delay, rather than reduce, epidemic-related deaths. Social distancing and mask use reduce the severity of the epidemic-related recession but prolong its duration. There is an important synergy between social distancing and mask use and testing/quarantining. Social distancing and mask use buy time for testing and quarantining to come to the rescue. The benefits of testing/quarantining are even larger when people can get reinfected, either because the virus mutates or immunity is temporary.
Keywords: epidemic; covid-19; recessions; testing; containment; quarantine
JEL Codes: E1; I1; H0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Social distancing and mask use (Z13) | delay epidemic-related deaths (I12) |
| Testing and quarantining (C90) | reduce costs associated with an epidemic (H12) |
| Testing and quarantining (C90) | reduce economic downturns (E69) |
| Social distancing and mask use (Z13) | reduce severity of economic recession (E65) |
| Social distancing and mask use (Z13) | prolong economic recovery (E65) |
| Social distancing and mask use + Testing and quarantining (C90) | reduce overall deaths (I12) |
| Reinfection dynamics (C22) | amplify benefits of testing and quarantining (C22) |
| Social distancing and mask use (Z13) | minimal effect on overall deaths (I12) |