Contagion, Migration and Misallocation in a Pandemic

34 Pages Posted: 5 Feb 2021 Last revised: 4 Jan 2022

See all articles by Ke Tang

Ke Tang

Institute of Economics, School of Social Sciences, Tsinghua University

Danxia Xie

Tsinghua University - Institute of Economics

Longtian Zhang

Central University of Finance and Economics

Date Written: January 2, 2022

Abstract

We present a multi-city migration model to study the endogenous choices of migration during a pandemic and to evaluate various policy alternatives as well. Analytical solutions are provided under the two situations respectively: laissez-faire equilibrium and social optimum. We find that migration rates diverge under these two situations, especially for the infected people. We also provide a new cross-country empirical fact that countries with higher COVID-19 mortality disparity across sub-regions tend to have lower nationwide mortality rates. This new fact is inconsistent with the prediction of the traditional misallocation literature, nevertheless is aligned with our theoretical model, which can be seen as an extension of the misallocation framework with cross-region contagion and externality. In addition, through numerical analyses we observe that the total social welfare can be increased by up to 2% in two-week time span with better policies. This research can shed light on policy design under pandemic threat and also help to enrich the misallocation literature.

Keywords: SIR Model, Migration, Misallocation, Hospitalization Resource, Pandemic

JEL Classification: I18, D61

Suggested Citation

Tang, Ke and Xie, Danxia and Zhang, Longtian, Contagion, Migration and Misallocation in a Pandemic (January 2, 2022). Available at SSRN: https://ssrn.com/abstract=3779278 or http://dx.doi.org/10.2139/ssrn.3779278

Ke Tang

Institute of Economics, School of Social Sciences, Tsinghua University ( email )

No.1 Tsinghua Garden
Beijing, 100084
China

Danxia Xie

Tsinghua University - Institute of Economics ( email )

MingZhai Building
Beijing, 100084
China

HOME PAGE: http://danxiaxie.com

Longtian Zhang (Contact Author)

Central University of Finance and Economics ( email )

Shahe Higher Education Park
Changping District
Beijing, Beijing 102206
China

HOME PAGE: http://longtianzhang.com

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