Epidemic Responses Under Uncertainty

63 Pages Posted: 29 May 2020 Last revised: 15 Mar 2024

See all articles by Michael Barnett

Michael Barnett

Arizona State University (ASU) - Finance Department

Greg Buchak

Stanford University Graduate School of Business

Constantine Yannelis

University of Chicago

Multiple version iconThere are 2 versions of this paper

Date Written: October 31, 2022

Abstract

We examine how policymakers react to a pandemic with uncertainty around key epidemiological and economic policy parameters by embedding a macroeconomic SIR model in a robust control framework. Uncertainty about disease virulence and severity leads to stricter and more persistent quarantines, while uncertainty about the economic costs of mitigation leads to less stringent quarantines. On net, an uncertainty-averse planner adopts stronger mitigation measures. Intuitively, the cost of underestimating the pandemic is out-of-control growth and permanent loss of life, while the cost of underestimating the economic consequences of quarantine is more transitory.

Keywords: COVID-19, ambiguity, model uncertainty, dynamic general equilibrium

JEL Classification: E1, H0, I1

Suggested Citation

Barnett, Michael and Buchak, Greg and Yannelis, Constantine, Epidemic Responses Under Uncertainty (October 31, 2022). Proceedings of the National Academy of Sciences 120, no. 2 (2023): e2208111120., Available at SSRN: https://ssrn.com/abstract=3610905 or http://dx.doi.org/10.2139/ssrn.3610905

Michael Barnett

Arizona State University (ASU) - Finance Department ( email )

W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States

Greg Buchak

Stanford University Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
6507214004 (Phone)
94305 (Fax)

Constantine Yannelis (Contact Author)

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

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