VoxEU, January 11, 2021, with Martin Gonzalez-Eiras. HTML.
Based on the CEPR discussion paper, we draw conclusions for the pandemic endgame. We explain why Israel will likely impose a harsher lockdown than other countries, especially poor ones. And why we should expect “inverse lockdowns”—measures to stimulate social interaction.
CEPR Discussion Paper 15541, December 2020, with Martin Gonzalez-Eiras. PDF (local copy).
We propose a flexible model of infectious dynamics with a single endogenous state variable and economic choices. We characterize equilibrium, optimal outcomes, static and dynamic externalities, and prove the following: (i) A lockdown generically is followed by policies to stimulate activity. (ii) Re-infection risk lowers the activity level chosen by the government early on and, for small static externalities, implies too cautious equilibrium steady-state activity. (iii) When a cure arrives deterministically, optimal policy is dis-continous, featuring a light/strict lockdown when the arrival date exceeds/falls short of a specific value. Calibrated to the ongoing COVID-19 pandemic the baseline model and a battery of robustness checks and extensions imply (iv) lockdowns for 3-4 months, with activity reductions by 25-40 percent, and (v) substantial welfare gains from optimal policy unless the government lacks instruments to stimulate activity after a lockdown.
VoxEU, June 5, 2020, with Martin Gonzalez-Eiras. HTML.
A comparison of epidemiological models for use in economic analyses, based on the CEPR discussion paper.
CEPR Discussion Paper 14791, May 2020, with Martin Gonzalez-Eiras. PDF (local copy).
We contrast the canonical epidemiological SIR model due to Kermack and McKendrick (1927) with more tractable alternatives that offer similar degrees of “realism” and flexibility. We provide results connecting the different models which can be exploited for calibration purposes. We use the expected spread of COVID-19 in the United States to exemplify our results.
Covid Economics, April 2020, with Martin Gonzalez-Eiras. PDF.
We embed a lockdown choice in a simplified epidemiological model and derive formulas for the optimal lockdown intensity and duration. The optimal policy reflects the rate of time preference, epidemiological factors, the hazard rate of vaccine discovery, learning effects in the health care sector, and the severity of output losses due to a lockdown. In our baseline specification a Covid-19 shock as currently experienced by the US optimally triggers a reduction in economic activity by two thirds, for about 50 days, or approximately 9.5 percent of annual GDP.
CEPR Discussion Paper 14612, April 2020, with Martin Gonzalez-Eiras. PDF (local copy).
We embed a lockdown choice in a simplified epidemiological model and derive formulas for the optimal lockdown intensity and duration. The optimal policy reflects the rate of time preference, epidemiological factors, the hazard rate of vaccine discovery, learning effects in the health care sector, and the severity of output losses due to a lockdown. In our baseline specification a Covid-19 shock as currently experienced by the US optimally triggers a reduction in economic activity by two thirds, for about 50 days, or approximately 9.5 percent of annual GDP.