Restarting the Economy While Saving Lives Under COVID-19

50 Pages Posted: 22 Apr 2020 Last revised: 30 Apr 2020

See all articles by Carlo A. Favero

Carlo A. Favero

Bocconi University - Department of Finance; Centre for Economic Policy Research (CEPR)

Andrea Ichino

European University Institute

Aldo Rustichini

University of Minnesota - Twin Cities - Department of Economics

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Date Written: April 30, 2020

Abstract

We provide, calibrate and test a realistic model of the spread of SARS-Cov-2 in an economy where the population has different age groups and sectors. The model takes into account factors that have proved to be essential in explaining features of the effect of the epidemic, in particular the constraint in the number of Intensive Care Units available in a region and the different response to the epidemic of individuals of different ages.

We characterize the policies of containment of the epidemic that are efficient with respect to important outcomes such as number of fatalities and GDP loss.

Our main finding is that prudent policies of gradual return to work even in the short period, may save many lives with limited economic costs, as long as a threshold is not reached. Further attempts to reduce fatalities beyond this threshold cause GDP losses that become extremely large.

The policies that allow this safe return to productive activity are a combination of selection criteria of individual allowed to return to work on the basis of age and risk of the sector in which they are employed.

Keywords: COVID-19, SEIR model, post lock-down policies

JEL Classification: I12, I18, D6, H84

Suggested Citation

Favero, Carlo A. and Ichino, Andrea and Rustichini, Aldo, Restarting the Economy While Saving Lives Under COVID-19 (April 30, 2020). Available at SSRN: https://ssrn.com/abstract=3580626 or http://dx.doi.org/10.2139/ssrn.3580626

Carlo A. Favero (Contact Author)

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

HOME PAGE: http://www.igier.unibocconi.it\favero

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Andrea Ichino

European University Institute ( email )

Villa Schifanoia
133 via Bocaccio
Firenze (Florence), 50014
Italy

Aldo Rustichini

University of Minnesota - Twin Cities - Department of Economics ( email )

271 19th Avenue South
Minneapolis, MN 55455
United States

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