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An Economic Model of the COVID-19 Pandemic With Young and Old Agents: Behavior, Testing and Policies

Author

Listed:
  • Luiz Brotherhood

  • Philipp Kircher

  • Cezar Santos

  • Michéle Tertilt

Abstract

This paper investigates the importance of the age composition in the Covid-19 pandemic. We augment a standard SIR epidemiological model with individual choices on work and non-work social distancing. Infected individuals are initially uncertain unless they are tested. We find that older individuals socially distance themselves substantially in equilibrium. Confining the old even more reduces their welfare. Confining the young extends the duration of the epidemic, with negative consequences on the old if the epidemic cannot be controlled after confinement. Testing and quarantines save lives, even if conducted just on the young, as does separation of activities by age. Combining policies can increase the welfare of both the young and the old.

Suggested Citation

  • Luiz Brotherhood & Philipp Kircher & Cezar Santos & Michéle Tertilt, 2020. "An Economic Model of the COVID-19 Pandemic With Young and Old Agents: Behavior, Testing and Policies," CRC TR 224 Discussion Paper Series crctr224_2020_175v2, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2020_175v2
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    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • I10 - Health, Education, and Welfare - - Health - - - General
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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