Working Paper: NBER ID: w27941
Authors: Thomas F. Hellmann; Veikko Thiele
Abstract: Thinking beyond Covid-19, there is a growing interest in what economic structures will be needed to face ongoing pandemics. In this paper we focus on the diagnostic problem and examine a new paradigm of voluntary self-testing by private individuals. People without symptoms face daily choices of either taking the risk of going out (to work and socialize), versus staying at home in self-isolation. Our theory shows that two types of people voluntary test themselves: those who otherwise would have self-isolated, and those who would have gone out indiscriminately. Our central insight is that the equilibrium infection risk falls when home-based testing becomes cheaper and easier to use, even if tests are not always accurate. Our results challenge the clinical mainstream view that diagnostic testing is a prerogative of the medical profession, and supports the notion that frequent self-testing is vital for an economy facing an ongoing pandemic.
Keywords: Voluntary Testing; Self-Isolation; Pandemic Economics
JEL Codes: D8; I12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| voluntary self-testing (C91) | self-isolation (F22) |
| self-isolation (F22) | reduction in risk of spreading the virus (I14) |
| lower price and easier use of tests (P22) | regular self-testing (C91) |
| regular self-testing (C91) | decrease in overall equilibrium infection risk (D50) |
| imperfect tests (C52) | valuable information influencing behavior (D91) |
| valuable information influencing behavior (D91) | reduction in infection risk (I14) |
| positive test results (C52) | self-isolation (F22) |
| overestimating accuracy of tests (C52) | increased self-testing (C91) |
| increased self-testing (C91) | reduction in equilibrium infection risk (I14) |