Internal and External Effects of Social Distancing in a Pandemic

38 Pages Posted: 21 Apr 2020

See all articles by Maryam Farboodi

Maryam Farboodi

MIT Sloan School of Management; National Bureau of Economic Research (NBER)

Gregor Jarosch

Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

Robert Shimer

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: April 18, 2020

Abstract

We use a conventional dynamic economic model to integrate individual optimization, equilibrium interactions, and policy analysis into the canonical epidemiological model. Our tractable framework allows us to represent both equilibrium and optimal allocations as a set of differential equations that can jointly be solved with the epidemiological model in a unified fashion. Quantitatively, the laissez-faire equilibrium accounts for the decline in social activity we measure in US micro-data from SafeGraph. Relative to that, we highlight three key features of the optimal policy: it imposes immediate, discontinuous social distancing; it keeps social distancing in place for a long time or until treatment is found; and it is never extremely restrictive, keeping the effective reproduction number mildly above the share of the population susceptible to the disease.

Suggested Citation

Farboodi, Maryam and Jarosch, Gregor and Shimer, Robert J., Internal and External Effects of Social Distancing in a Pandemic (April 18, 2020). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2020-47. Available at SSRN: https://ssrn.com/abstract=3580490 or http://dx.doi.org/10.2139/ssrn.3580490

Maryam Farboodi

MIT Sloan School of Management ( email )

100 Main Street
Cambridge, MA 02142
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Gregor Jarosch

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Robert J. Shimer (Contact Author)

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States
773-702-9015 (Phone)
773-702-8490 (Fax)

HOME PAGE: http://home.uchicago.edu/~shimer/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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