Working Paper: NBER ID: w27841
Authors: Anand Chopra; Michael B. Devereux; Amartya Lahiri
Abstract: We outline a macro-pandemic model where individuals can select into working from home or in the market. Market work increases the risk of infection. Occupations differ in the ease of substitution between market and home work, and in the risk of infection. We examine the evo- lution of a pandemic in the model as well as its macroeconomic and distributional consequences. The model is calibrated to British Columbian data to examine the implications of shutting down different industries by linking industries to occupations. We find that endogenous choice to self- isolate is key: it reduces the peak infection rate by 2 percentage points but reduces the trough consumption level by 4 percentage points, even without policy mandated lockdowns. The model also produces widening consumption inequality, a fact that has characterized COVID-19.
Keywords: Pandemic; Macroeconomics; Occupations; COVID-19
JEL Codes: E00; I00
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| endogenous choice to self-isolate (D91) | peak infection rate (J11) |
| endogenous choice to self-isolate (D91) | consumption levels (E21) |
| work location decisions (R30) | peak infection rate (J11) |
| work location decisions (R30) | consumption levels (E21) |
| risk aversion (D81) | work location decisions (R30) |
| work location decisions (R30) | consumption inequality (D31) |
| endogeneity of market participation (D40) | infection rates (I14) |
| endogeneity of market participation (D40) | economic recovery (E65) |