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COVID-19: Erroneous Modelling and Its Policy Implications

Author

Listed:
  • Bar-On, Yinon

    (Weizmann Institute of Science)

  • Baron, Tatiana

    (Ben Gurion University)

  • Cornfeld, Ofer
  • Milo, Ron

    (Weizmann Institute of Science)

  • Yashiv, Eran

    (Tel Aviv University)

Abstract

Research in Economics on COVID-19 posits an economy subject to disease dynamics, which are often seriously misspecified in terms of speed and scale. Using a social planner problem, we show that such misspecifications lead to misguided policy. Erroneously characterizing a relatively slow-moving disease engenders dramatically higher death tolls and excessive output loss relative to the correct benchmark. We delineate the latter, employing epidemiological evidence on the timescales of COVID-19 transmission and clinical progression. The resulting sound model is simple, transparent, and novel in Economics.

Suggested Citation

  • Bar-On, Yinon & Baron, Tatiana & Cornfeld, Ofer & Milo, Ron & Yashiv, Eran, 2021. "COVID-19: Erroneous Modelling and Its Policy Implications," IZA Discussion Papers 14202, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp14202
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    References listed on IDEAS

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    1. Yinon Bar-On & Tatiana Baron & Ofer Cornfeld & Eran Yashiv, 2023. "When to Lock, Not Whom: Managing Epidemics Using Time-Based Restrictions," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 292-321, December.
    2. Greg Kaplan & Benjamin Moll & Giovanni L. Violante, 2020. "The Great Lockdown and the Big Stimulus: Tracing the Pandemic Possibility Frontier for the U.S," NBER Working Papers 27794, National Bureau of Economic Research, Inc.
    3. Fernández-Villaverde, Jesús & Jones, Charles I., 2022. "Estimating and simulating a SIRD Model of COVID-19 for many countries, states, and cities," Journal of Economic Dynamics and Control, Elsevier, vol. 140(C).
    4. Fernando E. Alvarez & David Argente & Francesco Lippi, 2020. "A Simple Planning Problem for COVID-19 Lockdown," NBER Working Papers 26981, National Bureau of Economic Research, Inc.
    5. Glenn Ellison, 2020. "Implications of Heterogeneous SIR Models for Analyses of COVID-19," NBER Working Papers 27373, National Bureau of Economic Research, Inc.
    6. 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]," The Review of Financial Studies, Society for Financial Studies, vol. 34(11), pages 5188-5223.
    7. Andrew B. Abel & Stavros Panageas, 2020. "Social Distancing, Vaccination and the Paradoxical Optimality of an Endemic Equilibrium," NBER Working Papers 27742, National Bureau of Economic Research, Inc.
    8. Robert E. Hall & Charles I. Jones & Peter J. Klenow, 2020. "Trading Off Consumption and COVID-19 Deaths," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 42(1), pages 1-14, June.
    9. Christopher Avery & William Bossert & Adam Clark & Glenn Ellison & Sara Fisher Ellison, 2020. "An Economist's Guide to Epidemiology Models of Infectious Disease," Journal of Economic Perspectives, American Economic Association, vol. 34(4), pages 79-104, Fall.
    10. Daniel Stadlbauer & Jessica Tan & Kaijun Jiang & Matthew M. Hernandez & Shelcie Fabre & Fatima Amanat & Catherine Teo & Guha Asthagiri Arunkumar & Meagan McMahon & Christina Capuano & Kathryn Twyman &, 2021. "Repeated cross-sectional sero-monitoring of SARS-CoV-2 in New York City," Nature, Nature, vol. 590(7844), pages 146-150, February.
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    Cited by:

    1. Facundo Piguillem & Liyan Shi, 2022. "Optimal Covid-19 Quarantine and Testing Policies," The Economic Journal, Royal Economic Society, vol. 132(647), pages 2534-2562.

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    More about this item

    Keywords

    optimal policy; public health; GDP loss; COVID-19; disease dynamics and scale; misspecification;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • J17 - Labor and Demographic Economics - - Demographic Economics - - - Value of Life; Foregone Income

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