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SCARE: When Economics Meets Epidemiology with Covid-19

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Listed:
  • André de Palma
  • Nathalie Picard
  • Stef Proost

Abstract

We develop an epidemic model to explain and predict the dynamics of the SARS-CoV-2 virus and to assess the economic costs of lockdown scenarios. The standard epidemic three-variable model, SIR (Susceptible, Infected and Removed) is extended into a five-variable model SCARE: Susceptible, Carrier, Affected (i.e. sick), Recovered and Eliminated (i.e. dead). Using WHO and Oxford data on cases and deaths, we rely on indirect inference techniques to estimate the parameters of SIR and SCARE. We consider different observation rates and stringencies of lockdown. Both models are estimated for five countries and provide predictions on the number of cases, the number of deaths, and the basic reproduction number, R0. SCARE is used to test the impact of lockdown policies on economic costs for the well-documented Belgium case. Economic assessments of epidemic results on hospital, morbidity and mortality together with macro-economic impacts show that the total net benefits of the Belgian lockdown policy is negative for low valuations of life years lost. The gains of extending the Belgian lockdown policy are negative even for high valuation of life.

Suggested Citation

  • André de Palma & Nathalie Picard & Stef Proost, 2020. "SCARE: When Economics Meets Epidemiology with Covid-19," CESifo Working Paper Series 8573, CESifo.
  • Handle: RePEc:ces:ceswps:_8573
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    References listed on IDEAS

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    1. Martin S Eichenbaum & Sergio Rebelo & Mathias Trabandt, 2021. "The Macroeconomics of Epidemics [Economic activity and the spread of viral diseases: Evidence from high frequency data]," The Review of Financial Studies, Society for Financial Studies, vol. 34(11), pages 5149-5187.
    2. James H. Stock, 2020. "Data Gaps and the Policy Response to the Novel Coronavirus," NBER Working Papers 26902, National Bureau of Economic Research, Inc.
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    5. Christopher Avery & William Bossert & Adam Thomas Clark & Glenn Ellison & Sara Ellison, 2020. "Policy Implications of Models of the Spread of Coronavirus: Perspectives and Opportunities for Economists," CESifo Working Paper Series 8293, CESifo.
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    Cited by:

    1. Aspri, Andrea & Beretta, Elena & Gandolfi, Alberto & Wasmer, Etienne, 2021. "Mortality containment vs. Economics Opening: Optimal policies in a SEIARD model," Journal of Mathematical Economics, Elsevier, vol. 93(C).

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    Keywords

    COVID-19; public health; policy; simulation; social contact;
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