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Pandemic Recessions and Contact Tracing

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  • Melosi, Leonardo
  • Rottner, Matthias

Abstract

We study contact tracing in a new macro-epidemiological model with asymptomatic transmission and limited testing capacity. Contact tracing is a testing strategy that aims to reconstruct the infection chain of newly symptomatic agents. This strategy may be unsuccessful because of an externality leading agents to expand their interactions at rates exceeding policymakers' ability to test all the traced contacts. Complementing contact tracing with timely-deployed containment measures (e.g., social distancing or a tighter quarantine policy) corrects this externality and delivers outcomes that are remarkably similar to the benchmark case where tests are unlimited. We provide theoretical underpinnings to the risk of becoming infected in macro-epidemiological models. Our methodology to reconstruct infection chains is not affected by curse-of-dimensionality problems.

Suggested Citation

  • Melosi, Leonardo & Rottner, Matthias, 2020. "Pandemic Recessions and Contact Tracing," CEPR Discussion Papers 15482, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:15482
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    References listed on IDEAS

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    1. Fernando Alvarez & David Argente, 2020. "A Simple Planning Problem for COVID-19 Lockdown," Working Papers 2020-34, Becker Friedman Institute for Research In Economics.
    2. Veronica Guerrieri & Guido Lorenzoni & Ludwig Straub & Iván Werning, 2022. "Macroeconomic Implications of COVID-19: Can Negative Supply Shocks Cause Demand Shortages?," American Economic Review, American Economic Association, vol. 112(5), pages 1437-1474, May.
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    4. Andrew Atkeson, 2020. "What Will be the Economic Impact of COVID-19 in the US? Rough Estimates of Disease Scenarios," Staff Report 595, Federal Reserve Bank of Minneapolis.
    5. Mitman, Kurt & Rabinovich, Stanislav, 2021. "Whether, when and how to extend unemployment benefits: Theory and application to COVID-19," Journal of Public Economics, Elsevier, vol. 200(C).
    6. Ali Hortaçsu & Jiarui Liu & Timothy Schwieg, 2020. "Estimating the Fraction of Unreported Infections in Epidemics with a Known Epicenter: An Application to COVID-19," Working Papers 2020-37, Becker Friedman Institute for Research In Economics.
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    RePEc Biblio mentions

    As found on the RePEc Biblio, the curated bibliography for Economics:
    1. > Economics of Welfare > Health Economics > Economics of Pandemics > Specific pandemics > Covid-19 > Health > Tracing

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    Cited by:

    1. Melosi, Leonardo, 2022. "Comments on Epidemics in the New Keynesian model by Eichenbaum, Rebelo, and Trabandt”," Journal of Economic Dynamics and Control, Elsevier, vol. 140(C).

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    More about this item

    Keywords

    Contact tracing; Testing; Quarantine; Externality; Infection chain; Lockdown; Epidemics; Sir-macro model; Covid-19;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • I10 - Health, Education, and Welfare - - Health - - - General

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