Working Paper: CEPR ID: DP15310
Authors: Kurt Mitman; Douglas Hanley; Mark Bognanni; Daniel Kolliner
Abstract: Economic analysis of effective policies for managing epidemics requires an integrated economic and epidemiological approach. We develop and estimate a spatial, micro-founded model of the joint evolution of economic variables and the spread of an epidemic. We empirically discipline the model using new U.S. county-level data on health, mobility, employment outcomes, and non-pharmaceutical interventions (NPIs) at a daily frequency. Absent policy or medical interventions, the model predicts an initial period of exponential growth in new cases, followed by a protracted period of roughly constant case levels and reduced economic activity. Nevertheless, if vaccine development proved impossible, and suppression cannot entirely eradicate the disease, a utilitarian policymaker cannot improve significantly over the laissez-faire equilibrium by using lockdowns. Conversely, if a vaccine will arrive within two years, NPIs can improve upon the laissez-faire outcome by dramatically decreasing the number of infectious agents and keeping infections low until vaccine arrival. Mitigation measures that reduce viral transmission (e.g., mask-wearing) both reduce the virus's spread and increase economic activity.
Keywords: epidemics; economic policy; COVID-19; EconSIR
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| lack of intervention (I24) | exponential growth in new cases (O00) |
| lack of intervention (I24) | constant case levels and decreased economic activity (E32) |
| lockdowns (H76) | economic outcomes (F61) |
| NPIs (L31) | number of infections (I12) |
| NPIs (L31) | economic activity (E20) |
| economic activity (E20) | viral transmission (F42) |