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Optimal Mitigation Policies in a Pandemic: Social Distancing and Working from Home
[A simple planning problem for covid-19 lockdown]

Author

Listed:
  • Callum Jones
  • Thomas Philippon
  • Venky Venkateswaran

Abstract

We study an economy’s response to an unexpected epidemic. The spread of the disease can be mitigated by reducing consumption and hours worked in the office. Working from home is subject to learning-by-doing. Private agents’ rational incentives are relatively weak and fatalistic. The planner recognizes infection and congestion externalities and implements front-loaded mitigation. Under our calibration, the planner reduces cumulative fatalities by 48 compared to 24 by private agents, although with a sharper drop in consumption. Our model can replicate key industry and/or occupational-level patterns and explain how large variations in outcomes across regions can stem from small initial differences.

Suggested Citation

  • Callum Jones & Thomas Philippon & Venky Venkateswaran, 2021. "Optimal Mitigation Policies in a Pandemic: Social Distancing and Working from Home [A simple planning problem for covid-19 lockdown]," Review of Financial Studies, Society for Financial Studies, vol. 34(11), pages 5188-5223.
  • Handle: RePEc:oup:rfinst:v:34:y:2021:i:11:p:5188-5223.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhab076
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    References listed on IDEAS

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    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • I1 - Health, Education, and Welfare - - Health
    • H0 - Public Economics - - General

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