Working Paper: CEPR ID: DP15439
Authors: Pietro Garibaldi; Christopher Pissarides; Espen R. Moen
Abstract: In an optimizing model of epidemics several externalities arise when agentsshield to avoid infection. Optimizing behaviour delays herd immunity butalso reduces overall infections to approximately the minimum consistent withherd immunity. For reasonable parameter values, and with no vaccine, we find that agents delay too much because of a rat race toshield: they shield too much in the hope that others catch the disease andreach herd immunity. This and other externalities drive large wedges betweenprivate and social outcomes. The expectation of a vaccine reverses theeffects, and agents shield too little.
Keywords: SIR models; matching model; COVID-19; social distancing; rat race; herd immunity
JEL Codes: A12; I10; J18; D61; D62
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Agents' optimal shielding behavior (D82) | delay in reaching herd immunity (C92) |
| Expectation of a vaccine (I19) | less shielding (Y50) |
| less shielding (Y50) | potentially more infections (Y50) |
| Agents' optimal shielding behavior (D82) | overall infections (I12) |
| Static externalities (D62) | impact on efficiency of social distancing measures (F60) |
| Dynamic externalities (D62) | impact on efficiency of social distancing measures (F60) |