Optimal Covid-19 Quarantine and Testing Policies

57 Pages Posted: 8 May 2020 Last revised: 4 Feb 2022

See all articles by Facundo Piguillem

Facundo Piguillem

Einaudi Institute for Economics and Finance (EIEF)

Liyan Shi

Carnegie Mellon University

Date Written: April 2020


We study quantitatively the optimality of quarantine and testing policies; and whether they are complements or substitutes. We extend the epidemiological SEIR model incorporating an information friction. Our main finding is that testing is a cost-efficient substitute for lockdowns, rendering them almost unnecessary. By identifying carriers, testing contains the spread of the virus without reducing output. Although the implementation requires widespread massive testing. As a byproduct, we show that two distinct optimal lockdown policy types arise: suppression, intended to eliminate the virus, and mitigation, concerned about flattening the curve. The choice between them is determined by a "hope for the cure" effect, arising due to either an expected vaccine or the belief that the virus can be eliminated. Conditional on the policy type, the intensity and duration are invariant to the welfare function's shape: they depend mostly on the virus dynamics.

Keywords: COVID-19, Optimal quarantine, Optimal testing, Welfare cost of quarantines

JEL Classification: E1, E65, H12, I1

Suggested Citation

Piguillem, Facundo and Shi, Liyan, Optimal Covid-19 Quarantine and Testing Policies (April 2020). CEPR Discussion Paper No. DP14613, Available at SSRN: https://ssrn.com/abstract=3594243

Facundo Piguillem (Contact Author)

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Sallustiana, 62
Rome, 00187

Liyan Shi

Carnegie Mellon University ( email )

Tepper School of Business
5000 Forbes Ave
Pittsburgh, PA 15213
United States

HOME PAGE: http://www.liyanshi.com

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics