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Covid-19 supply-side fiscal policies to escape the health-vs-economy dilemma

Author

Listed:
  • Emanuele Colombo Azimonti

    (University of Pavia)

  • Luca Portoghese

    (University of Pavia)

  • Patrizio Tirelli

    (University of Pavia)

Abstract

We develop a model that allows for online retail trade and for endogenous Covid related health expenditures. The market equilibrium at best imperfectly internalises the infection risk from contact-intensive retail trade, and the anticipation of health costs has large contractionary effects. The Ramsey planner exploits a subsidy to online trade to limit lockdown policies. Relative to the market equilibrium, the optimal policy stimulates consumption and contains the surge in health expenditures, mitigating both the recession and the persistence of the Covid-19 shock.

Suggested Citation

  • Emanuele Colombo Azimonti & Luca Portoghese & Patrizio Tirelli, 2022. "Covid-19 supply-side fiscal policies to escape the health-vs-economy dilemma," DEM Working Papers Series 208, University of Pavia, Department of Economics and Management.
    • Handle: RePEc:pav:demwpp:demwp0208
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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