Working Paper: NBER ID: w27289
Authors: Michael Barnett; Greg Buchak; Constantine Yannelis
Abstract: We examine how policymakers react to a pandemic with uncertainty around key epidemiological and economic policy parameters by embedding a macroeconomic SIR model in a robust control framework. Uncertainty about disease virulence and severity leads to stricter and more persistent quarantines, while uncertainty about the economic costs of mitigation leads to less stringent quarantines. On net, an uncertainty averse planner adopts stronger mitigation measures. Intuitively, the cost of underestimating the pandemic is out-of-control growth and permanent loss-of-life, while the cost of underestimating the economic consequences of quarantine is more transitory.
Keywords: pandemic; uncertainty; quarantine; SIR model
JEL Codes: E1; H0; I1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Uncertainty about disease virulence and severity (D81) | Stricter and more persistent quarantines (C54) |
| Uncertainty regarding economic costs of mitigation (D89) | Less stringent quarantine measures (Y50) |
| Increased uncertainty about health parameters (D81) | Stronger public health responses (I14) |
| Underestimating the disease's severity (I12) | Significant public health crises (H12) |
| Misjudging economic impacts (F69) | Temporary economic setbacks (E32) |