An Economic Model of the Covid-19 Epidemic: The Importance of Testing and Age-Specific Policies

71 Pages Posted: 23 May 2020

See all articles by Luiz Brotherhood

Luiz Brotherhood

University of Barcelona; University of Barcelona - Barcelona Economic Analysis Team (BEAT)

Philipp Kircher

European University Institute

Cezar Santos

Getulio Vargas Foundation (FGV) - FGV/EPGE Escola Brasileira de Economia e Finanças

Michèle Tertilt

University of Mannheim - Department of Economics

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Abstract

This paper investigates the role of testing and age-composition in the Covid-19 epidemic. We augment a standard SIR epidemiological model with individual choices regarding how much time to spend working and consuming outside the house, both of which increase the risk of transmission. Individuals who have flu symptoms are unsure whether they caught Covid-19 or simply a common cold. Testing reduces the time of uncertainty. Individuals are heterogeneous with respect to age. Younger people are less likely to die, exacerbating their willingness to take risks and to impose externalities on the old. We explore heterogeneous policy responses in terms of testing, confinements, and selective mixing by age group.

Keywords: COVID-19, testing, social distancing, age-specific policies

JEL Classification: E17, C63, D62, I10, I18

Suggested Citation

Brotherhood, Luiz and Kircher, Philipp and Santos, Cezar and Tertilt, Michèle, An Economic Model of the Covid-19 Epidemic: The Importance of Testing and Age-Specific Policies. IZA Discussion Paper No. 13265, Available at SSRN: https://ssrn.com/abstract=3608514

Luiz Brotherhood (Contact Author)

University of Barcelona

University of Barcelona - Barcelona Economic Analysis Team (BEAT) ( email )

Gran Via de les Corts Catalanes
Barcelona, 08007
Spain

Philipp Kircher

European University Institute ( email )

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

Cezar Santos

Getulio Vargas Foundation (FGV) - FGV/EPGE Escola Brasileira de Economia e Finanças ( email )

Praia de Botafogo 190/1125, CEP
Rio de Janeiro RJ 22253-900
Brazil

HOME PAGE: http://sites.google.com/site/czrsantos

Michèle Tertilt

University of Mannheim - Department of Economics ( email )

D-68131 Mannheim
Germany

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