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Working Paper
Optimal Management of an Epidemic: Lockdown, Vaccine and Value of Life
This paper analyzes the optimal management of a pandemic (stay-at-home and vaccination policies) in a dynamic model. The optimal lockdown policies respond to the spread of the virus with significant restrictions to employment, followed by partial loosening before the peak of the epidemic. Upon the availability of a vaccine, the optimal vaccination policy has an almost bang-bang property, despite the loss of immunity of the vaccinated: vaccinate at the highest possible rate, and then rapidly converge to the steady state. The model illustrates interesting trade-offs as it implies that lower ...
Working Paper
Pandemic Recessions and Contact Tracing
We study contact tracing in a new macro-epidemiological model in which infected agents may not show any symptoms of the disease and the availability of tests to detect these asymptomatic spreaders of the virus is limited. Contact tracing is a testing strategy aiming at reconstructing the infection chain of newly symptomatic agents. A coordination failure arises as agents fail to internalize that their individual consumption and labor decisions raise the number of traceable contacts to be tested, threatening the viability of the tracing system. The collapse of the tracing system considerably ...
Report
Pandemic Lockdown: The Role of Government Commitment
This paper studies lockdown policy in a dynamic economy without government commitment. Lockdown imposes a cap on labor supply, which improves health prospects at the cost of economic output and consumption. A government would like to commit to the extent of future lockdowns in order to guarantee an economic outlook that supports efficient levels of investment into intermediate inputs. However, such a commitment is not credible, since investments are sunk at the time when the government chooses a lockdown. As a result, lockdown under lack of commitment deviates from the optimal policy. Rules ...
Journal Article
How Has the Current Lockdown in China Affected the Global Supply Chain?
The recent lockdown in China is expected to exacerbate disruptions in the global supply chain. Using high-frequency data, I show that supply chain disruptions from the current lockdown are likely to be less severe than those from the lockdown in 2020. However, highly transmissible COVID-19 variants continue to present risks, and supply chain disruptions could intensify if the current lockdown is extended or applied to other regions of China.
Discussion Paper
Impacts of COVID-19: Mitigation Efforts versus Herd Immunity
The rapid spread of COVID-19 is having devastating effects on the global economy. With death curves beginning to bend, governments will soon need to determine when and how to relax lockdown measures. The crucial question is: what are the public health consequences of reopening the economy? In this article, we argue that the observed decline in daily deaths could be due to two scenarios: social distancing measures and herd immunity. Both the widely used SIR model and the data collected thus far cannot distinguish these two scenarios. Such an identiļ¬cation problem generates a large degree of ...
Working Paper
Optimal Epidemic Control in Equilibrium with Imperfect Testing and Enforcement
We analyze equilibrium behavior and optimal policy within a Susceptible-Infected-Recovered epidemic model augmented with potentially undiagnosed agents who infer their health status and a social planner with imperfect enforcement of social distancing. We define and prove the existence of a perfect Bayesian Markov competitive equilibrium and contrast it with the efficient allocation subject to the same informational constraints. We identify two externalities, static (individual actions affect current risk of infection) and dynamic (individual actions affect future disease prevalence), and ...