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An economic model of the Covid-19 epidemic: The importance of testing and age-specific policies

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Listed:
  • Santos, Cezar
  • Brotherhood, Luiz
  • Kircher, Philipp
  • Tertilt, Michèle

Abstract

This paper investigates the role of testing and age-composition in the Covid-19 epidemic. We augment a standard SIR epidemiological model with individual choices regarding how much time to spend working and consuming outside the house, both of which increase the risk of transmission. Individuals who have flu symptoms are unsure whether they caught Covid-19 or simply a common cold. Testing reduces the time of uncertainty. Individuals are heterogeneous with respect to age. Younger people are less likely to die, exacerbating their willingness to take risks and to impose externalities on the old. We explore heterogeneous policy responses in terms of testing, confinements, and selective mixing by age group.

Suggested Citation

  • Santos, Cezar & Brotherhood, Luiz & Kircher, Philipp & Tertilt, Michèle, 2020. "An economic model of the Covid-19 epidemic: The importance of testing and age-specific policies," CEPR Discussion Papers 14695, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:14695
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    More about this item

    Keywords

    Covid-19; Testing; Social distancing; Age-specific policies;
    All these keywords.

    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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