Economic and Epidemic Implications of Virus Containment Policies: Insights from Agent-Based Simulations

49 Pages Posted: 30 Jun 2020

See all articles by Alessandro Basurto

Alessandro Basurto

Bielefeld University - Department of Business Administration and Economics

Herbert Dawid

Bielefeld University - Department of Business Administration and Economics; Center for Mathematical Economics

Philipp Harting

Bielefeld University - Faculty of Business Administration and Economics

Jasper Hepp

Bielefeld University - Department of Business Administration and Economics

Dirk Kohlweyer

Bielefeld University - Department of Business Administration and Economics

Date Written: June 24, 2020

Abstract

This paper analyzes the implications of different designs of policies, which aim to contain the diffusion of the SARS-CoV-2 virus, with respect to induced economic loss and virus mortality. An agent-based simulation model is implemented and calibrated with German data, which combines the representation of a simple multi-sectoral closed economy with the explicit incoporation of virus transmission channels at the workplace, during shopping activities and other social contacts. It is demonstrated that under a policy resembling German containment measures the model closely repuduces the dynamics of pandemic and economic variables in the aftermath of the COVID-19 outbreak in Germany. Exploring alternative policy designs shows that any efficient policy should impose a low threshold of newly infected for moving from the lock-down to the opening-up stage and in the opening-up stage all restrictions on economic activity should be lifted. With respect to the reduction of consumption activities during the lock-down a trade-off between the induced GDP loss and the resulting mortality emerges. Regardless of the chosen design of the containment measures, the introduction of complementary economic support measures substantially reduces the induced GDP loss and leads to a reduction of the public debt accumulated during the considered time interval. The efficient design of containment policies changes substantially if lifting economic restrictions during the opening-up stage also results in reduced effectiveness of the individual prevention measures by agents.

Keywords: COVID-19, economic loss, containment policy, exit strategy, agent-based modeling

JEL Classification: C63, E17, H12

Suggested Citation

Basurto, Alessandro and Dawid, Herbert and Harting, Philipp and Hepp, Jasper and Kohlweyer, Dirk, Economic and Epidemic Implications of Virus Containment Policies: Insights from Agent-Based Simulations (June 24, 2020). Bielefeld Working Papers in Economics and Management No. 05-2020, Available at SSRN: https://ssrn.com/abstract=3635329 or http://dx.doi.org/10.2139/ssrn.3635329

Alessandro Basurto (Contact Author)

Bielefeld University - Department of Business Administration and Economics ( email )

P.O. Box 100131
D-33501 Bielefeld, NRW 33501
Germany

Herbert Dawid

Bielefeld University - Department of Business Administration and Economics ( email )

P.O. Box 100131
D-33501 Bielefeld, NRW 33501
Germany
+49-521-1064843 (Phone)
+49-521-1062994 (Fax)

Center for Mathematical Economics ( email )

Postfach 10 01 31
Bielefeld, D-33501
Germany

Philipp Harting

Bielefeld University - Faculty of Business Administration and Economics ( email )

Universitätsstraße 25
Bielefeld, 33615
Germany

Jasper Hepp

Bielefeld University - Department of Business Administration and Economics ( email )

P.O. Box 100131
Bielefeld, NRW 33501
Germany

Dirk Kohlweyer

Bielefeld University - Department of Business Administration and Economics ( email )

P.O. Box 100131
D-33501 Bielefeld, NRW 33501
Germany

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