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Diffusion of COVID-19 in Social and Production Networks: Simulation Evidence from a Dynamic Model

Author

Listed:
  • Victor Aguirregabiria
  • Jiaying Gu
  • Yao Luo
  • Pedro Mira

Abstract

This paper presents a dynamic model to evaluate economic and public health effects of the diffusion of COVID-19. Our framework combines a SIR epidemiological model of virus diffusion with a dynamic game of network production and social interactions. The economy comprises three types of geographic locations: homes, workplaces, and consumption places. Each individual has her own set of locations where she develops her life. The combination of these sets for all the individuals determines the economy's production and social network. Every day, individuals choose to work and consume either outside (with physical interaction with other people) or remotely (from home, without physical interactions). Working (and consuming) outside is more productive and generates stronger complementarities (positive externality). However, in the presence of a virus, working outside facilitates infection and the diffusion of the virus (negative externality). Individuals are forward-looking. We calibrate the model and implement numerical experiments to evaluate the health and economic impact of several counterfactual public policies: subsidies for working at home; testing policies; herd immunity; and changes in the network structure. These policies generate substantial differences in the propagation of the virus and its economic impact.

Suggested Citation

  • Victor Aguirregabiria & Jiaying Gu & Yao Luo & Pedro Mira, 2021. "Diffusion of COVID-19 in Social and Production Networks: Simulation Evidence from a Dynamic Model," Annals of Economics and Statistics, GENES, issue 142, pages 179-210.
  • Handle: RePEc:adr:anecst:y:2021:i:142:p:179-210
    DOI: https://doi.org/10.15609/annaeconstat2009.142.0179
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    Cited by:

    1. Bisin, Alberto & Moro, Andrea, 2022. "Spatialā€SIR with network structure and behavior: Lockdown rules and the Lucas critique," Journal of Economic Behavior & Organization, Elsevier, vol. 198(C), pages 370-388.
    2. Nicholas W. Papageorge, 2021. "Modeling Behavior during a Pandemic: Using HIV as an Historical Analogy," NBER Working Papers 28898, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Virus Diffusion; Dynamics; Production and Social Networks; Production Externalities; Public Health;
    All these keywords.

    JEL classification:

    • C57 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Econometrics of Games and Auctions
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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