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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

    as
    1. 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.
    2. Luiz Brotherhood & Philipp Kircher & Cezar Santos & Michèle Tertilt, 2020. "An Economic Model of the Covid-19 Epidemic: The Importance of Testing and Age-Specific Policies," CESifo Working Paper Series 8316, CESifo.
    3. Erik Brynjolfsson & John J. Horton & Adam Ozimek & Daniel Rock & Garima Sharma & Hong-Yi TuYe, 2020. "COVID-19 and Remote Work: An Early Look at US Data," NBER Working Papers 27344, National Bureau of Economic Research, Inc.
    4. Michael Kremer, 1996. "Integrating Behavioral Choice into Epidemiological Models of AIDS," The Quarterly Journal of Economics, Oxford University Press, vol. 111(2), pages 549-573.
    5. Favero, Carlo A. & Ichino, Andrea & Rustichini, Aldo, 2020. "Restarting the economy while saving lives under Covid-19," CEPR Discussion Papers 14664, C.E.P.R. Discussion Papers.
    6. Alexander W. Bartik & Marianne Bertrand & Zoe B. Cullen & Edward L. Glaeser & Michael Luca & Christopher T. Stanton, 2020. "How Are Small Businesses Adjusting to COVID-19? Early Evidence from a Survey," Working Papers 2020-42, Becker Friedman Institute for Research In Economics.
    7. Fernando Alvarez & David Argente, 2020. "A Simple Planning Problem for COVID-19 Lockdown," Working Papers 2020-34, Becker Friedman Institute for Research In Economics.
    8. Flavio Toxvaerd, 2019. "Rational Disinhibition And Externalities In Prevention," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 60(4), pages 1737-1755, November.
    9. Michael Kremer, 1996. "Integrating Behavioral Choice into Epidemiological Models of the AIDS Epidemic," NBER Working Papers 5428, National Bureau of Economic Research, Inc.
    10. Tat Y. Chan & Barton H. Hamilton & Nicholas W. Papageorge, 2016. "Health, Risky Behaviour and the Value of Medical Innovation for Infectious Disease," Review of Economic Studies, Oxford University Press, vol. 83(4), pages 1465-1510.
    11. Alexander W. Bartik & Marianne Bertrand & Zoë B. Cullen & Edward L. Glaeser & Michael Luca & Christopher T. Stanton, 2020. "How Are Small Businesses Adjusting to COVID-19? Early Evidence from a Survey," NBER Working Papers 26989, National Bureau of Economic Research, Inc.
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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. 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.
    2. Jerbashian, Vahagn & Vilalta-Bufi, Montserrat, 2020. "The Impact of ICT on Working from Home: Evidence from EU Countries," GLO Discussion Paper Series 719, Global Labor Organization (GLO).

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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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