Between Lives and Economy: Optimal COVID-19 Containment Policy in Open Economies

39 Pages Posted: 11 Oct 2020 Last revised: 14 Oct 2020

See all articles by Wen-Tai Hsu

Wen-Tai Hsu

Singapore Management University

Hsuan-Chih Lin

Academia Sinica - Institute of Economics

Han Yang

Academia Sinica - Institute of Economics

Date Written: October 14, 2020

Abstract

This paper studies optimal containment policy for combating a pandemic in an open- economy context. It does so via quantitative analyses using a model that incorporates a standard epidemiological compartmental model in a multi-country, multi-sector Ricardian model of international trade with full-fledged input-output linkages. We devise a novel approach in computing optimal national policies in the long run, and contrast these policies with a baseline in which countries maintain their current policies until vaccine availability. The welfare gains under optimal policies are asymmetric as the gains for the set of countries which should tighten up the containment measures are much larger than those which should relax. We also find that the welfare implications of optimal policies in open economies differ significantly from those in closed ones.

Keywords: COVID-19, pandemic, welfare analysis, containment policy, optimal policy, open economy, trade, input-output linkages

JEL Classification: I18; F11; F40; E27

Suggested Citation

Hsu, Wen-Tai and Lin, Hsuan-Chih and Yang, Han, Between Lives and Economy: Optimal COVID-19 Containment Policy in Open Economies (October 14, 2020). Available at SSRN: https://ssrn.com/abstract=3705800 or http://dx.doi.org/10.2139/ssrn.3705800

Wen-Tai Hsu (Contact Author)

Singapore Management University ( email )

90 Stamford Road
178903
Singapore
178903 (Fax)

HOME PAGE: http://wthsu.weebly.com

Hsuan-Chih Lin

Academia Sinica - Institute of Economics ( email )

128 Academia Road, Section 2
Nankang
Taipei, 11529
Taiwan

Han Yang

Academia Sinica - Institute of Economics ( email )

128 Academia Road, Section 2
Nankang
Taipei, 11529
Taiwan

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