How Should Policy Responses to the Covid-19 Pandemic Differ in the Developing World?

52 Pages Posted: 2 Jun 2020 Last revised: 9 Jun 2020

See all articles by Titan Alon

Titan Alon

University of California, San Diego (UCSD)

Minki Kim

University of California, San Diego (UCSD) - Department of Economics

David Lagakos

University of California, San Diego (UCSD) - Department of Economics; National Bureau of Economic Research (NBER)

Mitchell VanVuren

University of California San Diego

Date Written: May 2020

Abstract

This paper quantitatively analyzes how policy responses to the COVID-19 pandemic should differ in developing countries. To do so we build an incomplete-markets macroeconomic model with heterogeneous agents and epidemiological dynamics that features several of the key distinctions between advanced and developing economies germane to the pandemic. We focus in particular on differences in: age structure, fiscal capacity, healthcare capacity, informality, and the frequency of contacts between individuals at home, work, school and other locations. The model predicts that blanket lockdowns are less effective in developing countries, saving fewer lives per unit of lost GDP. In contrast, age-specific policies are even more effective, since they focus scarce public funds on shielding the smaller population of older individuals. School closures are also more effective at saving lives in developing countries, providing a greater reduction in secondary transmissions between children and older adults at home.

Suggested Citation

Alon, Titan and Kim, Minki and Lagakos, David and VanVuren, Mitchell, How Should Policy Responses to the Covid-19 Pandemic Differ in the Developing World? (May 2020). NBER Working Paper No. w27273, Available at SSRN: https://ssrn.com/abstract=3615469

Titan Alon (Contact Author)

University of California, San Diego (UCSD) ( email )

9500 Gilman Drive
Mail Code 0502
La Jolla, CA 92093-0112
United States

Minki Kim

University of California, San Diego (UCSD) - Department of Economics ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States

David Lagakos

University of California, San Diego (UCSD) - Department of Economics ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Mitchell VanVuren

University of California San Diego

9500 Gilman Drive
La Jolla, CA 92093
United States

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