On the Optimal 'Lockdown' During an Epidemic

Gonzalez-Eiras, Martín; Niepelt, Dirk

doi:10.2139/ssrn.3587254

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On the Optimal 'Lockdown' During an Epidemic

CESifo Working Paper No. 8240

18 Pages Posted: 28 Apr 2020

See all articles by Martín Gonzalez-Eiras

Dirk Niepelt

University of Bern - Department of Economics

Date Written: 2020

Abstract

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.

Keywords: epidemic, pandemic, lockdown, social distancing, production shortfall, health care system, Covid-19, SIR model, logistic model

JEL Classification: I180

Suggested Citation: Suggested Citation

Gonzalez-Eiras, Martín and Niepelt, Dirk, On the Optimal 'Lockdown' During an Epidemic (2020). CESifo Working Paper No. 8240, Available at SSRN: https://ssrn.com/abstract=3587254 or http://dx.doi.org/10.2139/ssrn.3587254