Working Paper: NBER ID: w27244
Authors: David Baqaee; Emmanuel Farhi; Michael J. Mina; James H. Stock
Abstract: We use a five-age epidemiological model, combined with 66-sector economic accounting, to address a variety of questions concerning the economic reopening. We calibrate/estimate the model using contact survey data and data on weekly historical individual actions and non-pharmaceutical interventions in the weeks ending March 8 – May 16, 2020. Going forward, we model a decision-maker (governor) as following reopening guidelines like those proposed by the White House and the CDC. The sectoral accounting, combined with information on personal proximity and ability to work from home by sector, make it possible to construct a GDP-to-Risk index of which sectors provide the greatest increment in GDP per marginal increase in R0. Through simulations, we find that: a strong economic reopening is possible; a “smart” reopening, preferencing some sectors over others, makes only modest improvements over a broad reopening; and all this hinges on retaining strong restrictions on non-work social contacts. If non-work contacts – going to bars, shopping without social distancing and masks, large group gatherings, etc. – return only half-way to the pre-COVID-19 baseline, the current decline in deaths reverses leading to a second wave of business closures.
Keywords: COVID-19; Economic Reopening; Epidemiological Model; Non-Pharmaceutical Interventions; GDP-to-Risk Index
JEL Codes: E60; I10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| strong economic reopening (F41) | stringent personal protections outside of work (J28) |
| smart reopening (M13) | modest improvements in economic outcomes (P17) |
| keeping workers who can work from home (J63) | modest decrease in infections and deaths (I14) |
| age-based work policies (J78) | impede economic recovery (E65) |
| relaxing NPIs (F50) | second wave of contagion and deaths (F65) |
| testing, tracing, and quarantine measures (C12) | additional space for reopening (R53) |