Efficient Policy Interventions in an Epidemic

37 Pages Posted: 3 Nov 2020

See all articles by Alberto Bisin

Alberto Bisin

New York University (NYU) - Department of Economics; New York University (NYU) - Center for Experimental Social Science (CESS); National Bureau of Economic Research (NBER)

Piero Gottardi

European University Institute - Department of Economics; Ca Foscari University of Venice - Dipartimento di Economia; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: October 2020

Abstract

In the context of an epidemic, a society is forced to face a complex system of externalities in consumption and in production. Command economy interventions can support Efficient allocations at the cost of severe information requirements. Competitive markets for infection rights (alternatively, Pigouvian taxes) can guarantee instead efficiency without requiring direct policy interventions on the activity of agents and firms. We demonstrate that this is the case also when the infections cannot be associated to the activities which originated them; and moral hazard then ensues. Finally, we extend the analysis to situations where governments have only incomplete information regarding the values of the parameters of the infection process or of firms' production processes.

Keywords: Epidemic, Externalities, infection rights, Pigouvian Taxes

JEL Classification: D62, D82, H23

Suggested Citation

Bisin, Alberto and Gottardi, Piero, Efficient Policy Interventions in an Epidemic (October 2020). Available at SSRN: https://ssrn.com/abstract=3723578

Alberto Bisin (Contact Author)

New York University (NYU) - Department of Economics

14 West 4th Street
New York, NY 10012
United States

New York University (NYU) - Center for Experimental Social Science (CESS) ( email )

One Washington Place
New York, NY 10003
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Piero Gottardi

European University Institute - Department of Economics ( email )

Villa Schifanoia
133 via Bocaccio
Firenze (Florence), Tuscany 50014
Italy

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy
+39 041 257 4192 (Phone)
+39 041 257 4176 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
0
Abstract Views
184
PlumX Metrics