Restarting the Economy While Saving Lives Under Covid-19

50 Pages Posted: 8 May 2020 Last revised: 29 Jun 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

Multiple version iconThere are 2 versions of this paper

Date Written: April 2020

Abstract

We provide, calibrate and test a realistic model of the spread of SARS-Cov-2 in an economy with different risks related to age and sectors. The model considers hospital congestion and response of individuals adjusting their behavior to the virus' spread. We measure precisely the size of these effects using real data for Italy on intensive care capacity and mobility decisions; thus our claim is that the tradeoffs we estimate are quantitatively, rather than qualitatively, approximately correct.

We characterize the policies of containment of the epidemic that are efficient with respect to number of fatalities and GDP loss. Prudent policies of gradual return to work may save many lives with limited economic costs, as long as they differentiate by age group and risk sector. More careful behavior of individuals induced by the perceived cost of infection may contribute to further reduce fatalities.

Keywords: COVID19, post lockdown policies, SEIR model

JEL Classification: D6, H84, I12, I18

Suggested Citation

Favero, Carlo A. and Ichino, Andrea and Rustichini, Aldo, Restarting the Economy While Saving Lives Under Covid-19 (April 2020). CEPR Discussion Paper No. DP14664, Available at SSRN: https://ssrn.com/abstract=3594296

Carlo A. Favero

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 (Contact Author)

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

271 19th Avenue South
Minneapolis, MN 55455
United States

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