Spatial-SIR with Network Structure and Behavior: Lockdown Rules and the Lucas Critique

We introduce a model of the diffusion of an epidemic with demographically heterogeneous agents interacting socially on a spatially structured network. Contagion-risk averse agents respond behaviorally to the diffusion of the infections by limiting their social interactions. Firms also respond by allowing employees to work remotely, depending on their productivity. The spatial structure induces local herd immunities along sociodemographic dimensions, which significantly affect the dynamics of infections. We study several non-pharmaceutical interventions; e.g., i) lockdown rules, which set thresholds on the spread of the infection for the closing and reopening of economic activities; and ii) selective lockdowns, which restrict social interactions by location (in the network) and by the demographic characteristics of the agents. Substantiating a “Lucas critique” argument, we assess the cost of naive discretionary policies ignoring agents and firms’ behavioral responses.