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Economics and Epidemics: Evidence from an Estimated Spatial Econ-SIR Model

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Abstract

Economic analysis of effective policies for managing epidemics requires an integrated economic and epidemiological approach. We develop and estimate a spatial, micro-founded model of the joint evolution of economic variables and the spread of an epidemic. We empirically discipline the model using new U.S. county-level data on health, mobility, employment outcomes, and non-pharmaceutical interventions (NPIs) at a daily frequency. Absent policy or medical interventions, the model predicts an initial period of exponential growth in new cases, followed by a protracted period of roughly constant case levels and reduced economic activity. Nevertheless, if vaccine development proved impossible, and suppression cannot entirely eradicate the disease, a utilitarian policymaker cannot improve significantly over the laissez-faire equilibrium by using lockdowns. Conversely, if a vaccine will arrive within two years, NPIs can improve upon the laissez-faire outcome by dramatically decreasing the number of infectious agents and keeping infections low until vaccine arrival. Mitigation measures that reduce viral transmission (e.g., mask-wearing) both reduce the virus's spread and increase economic activity.

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  • Mark Bognanni & Douglas Hanley & Daniel Kolliner & Kurt Mitman, 2020. "Economics and Epidemics: Evidence from an Estimated Spatial Econ-SIR Model," Finance and Economics Discussion Series 2020-091, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgfe:2020-91
    DOI: 10.17016/FEDS.2020.091
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    As found on the RePEc Biblio, the curated bibliography for Economics:
    1. > Economics of Welfare > Health Economics > Economics of Pandemics > Specific pandemics > Covid-19 > Modelling > Statistical Modelling

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    Cited by:

    1. Makris, M. & Toxvaerd, F., 2020. "Great Expectations: Social Distancing in Anticipation of Pharmaceutical Innovations," Cambridge Working Papers in Economics 2097, Faculty of Economics, University of Cambridge.
    2. Jonas E. Arias & Jesús Fernández-Villaverde & Juan F. Rubio-Ramírez & Minchul Shin, 2021. "Bayesian Estimation of Epidemiological Models: Methods, Causality, and Policy Trade-Offs," CESifo Working Paper Series 8977, CESifo.
    3. Glover, Andrew & Heathcote, Jonathan & Krueger, Dirk, 2022. "Optimal age-Based vaccination and economic mitigation policies for the second phase of the covid-19 pandemic," Journal of Economic Dynamics and Control, Elsevier, vol. 140(C).
    4. Houštecká, Anna & Koh, Dongya & Santaeulàlia-Llopis, Raül, 2021. "Contagion at work: Occupations, industries and human contact," Journal of Public Economics, Elsevier, vol. 200(C).
    5. Jonas E. Arias & Jesús Fernández-Villaverde & Juan F. Rubio-Ramirez & Minchul Shin, 2021. "Bayesian Estimation of Epidemiological Models: Methods, Causality, and Policy Trade-Offs," Working Papers 21-18, Federal Reserve Bank of Philadelphia.
    6. 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).
    7. Hakan Yilmazkuday, 2021. "Welfare Costs of Travel Reductions within the U.S. due to COVID-19," Working Papers 2114, Florida International University, Department of Economics.
    8. Ma, Xiangyu & Zhou, Huijie & Li, Zhiyi, 2021. "On the resilience of modern power systems: A complex network perspective," Renewable and Sustainable Energy Reviews, Elsevier, vol. 152(C).
    9. Jonas E. Arias & Jesús Fernández-Villaverde & Juan Rubio Ramírez & Minchul Shin, 2021. "The Causal Effects of Lockdown Policies on Health and Macroeconomic Outcomes," NBER Working Papers 28617, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    Epidemics; Covid-19; Econ-sir; Economic policy;
    All these keywords.

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • I10 - Health, Education, and Welfare - - Health - - - General

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