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Firm behavior during an epidemic

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  • Brotherhood, Luiz
  • Jerbashian, Vahagn

Abstract

We derive a model in which firms operate in an epidemic environment and internalize infections among their employees in the workplace. The model is calibrated to fit the properties of the Covid-19 epidemic. We show that firms have incentives to fight against infections and can do so very effectively by increasing teleworking and rotating employees between on-site work, teleworking, and leave. Subsidies to sick leave reduce the cost of sick workers and raise workplace infections. Furlough policies are successful in reducing infections and saving lives. Firms delay and weaken the fight against infections during economic downturns.

Suggested Citation

  • Brotherhood, Luiz & Jerbashian, Vahagn, 2020. "Firm behavior during an epidemic," GLO Discussion Paper Series 629, Global Labor Organization (GLO).
  • Handle: RePEc:zbw:glodps:629
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    References listed on IDEAS

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    RePEc Biblio mentions

    As found on the RePEc Biblio, the curated bibliography for Economics:
    1. > Economics of Welfare > Health Economics > Economics of Pandemics > Policy responses

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    Cited by:

    1. Vahagn Jerbashian & Montserrat Vilalta-Bufi, 2020. "The Impact of ICT on Working from Home: Evidence from EU Countries," UB Economics Working Papers 2020/404, Universitat de Barcelona, Facultat d'Economia i Empresa, UB School of Economics.
    2. Alejandro Fernández-Cerezo & Beatriz González & Mario Izquierdo & Enrique Moral-Benito, 2021. "Firm-level heterogeneity in the impact of the COVID-19 pandemic," Working Papers 2120, Banco de España.

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    More about this item

    Keywords

    Covid-19; epidemic; firm behavior; on-site work; policies; teleworking;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D20 - Microeconomics - - Production and Organizations - - - General
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • I10 - Health, Education, and Welfare - - Health - - - General
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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