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Optimal COVID-19 Quarantine and Testing Policies

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  • Piguillem, Facundo
  • Shi, Liyan

Abstract

We study quantitatively the optimality of quarantine and testing policies; and whether they are complements or substitutes. We extend the epidemiological SEIR model incorporating an information friction. Our main finding is that testing is a cost-efficient substitute for lockdowns, rendering them almost unnecessary. By identifying carriers, testing contains the spread of the virus without reducing output. Although the implementation requires widespread massive testing. As a byproduct, we show that two distinct optimal lockdown policy types arise: suppression, intended to eliminate the virus, and mitigation, concerned about flattening the curve. The choice between them is determined by a "hope for the cure" effect, arising due to either an expected vaccine or the belief that the virus can be eliminated. Conditional on the policy type, the intensity and duration are invariant to the welfare function's shape: they depend mostly on the virus dynamics.

Suggested Citation

  • Piguillem, Facundo & Shi, Liyan, 2020. "Optimal COVID-19 Quarantine and Testing Policies," CEPR Discussion Papers 14613, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:14613
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    More about this item

    Keywords

    Covid-19; Optimal quarantine; Optimal testing; Welfare cost of quarantines;
    All these keywords.

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • I1 - Health, Education, and Welfare - - Health

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