Between Lives and Economy: Optimal COVID-19 Containment Policy in Open Economies
39 Pages Posted: 11 Oct 2020 Last revised: 14 Oct 2020
Date Written: October 14, 2020
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: Suggested Citation