Profits, Pandemics, and Lockdown Effectiveness: Theory and Evidence from Nursing Home Networks

44 Pages Posted: 2 Nov 2022 Last revised: 7 Jun 2023

See all articles by Roland Pongou

Roland Pongou

University of Ottawa - Department of Economics

Ghislain Junior Sidie

University of Ottawa

Guy Tchuente

University of Kent

Jean-Baptiste Tondji

University of Texas Rio Grande Valley (UTRGV) (Formerly University of Texas-Pan American) - Economics and Finance; Department of Economics and Finance, University of Texas Rio Grande Valley

Abstract

How do the effects of government policy response to health crises differ for for-profit and not-for-profit organizations? We theoretically address this question through the lens of a two-sector continuous-time individual-based mean-field theoretical model incorporating a social network and show that a unique equilibrium exists under classical conditions. We test our model using unique data on nursing home networks in the United States. We calibrate the model and jointly quantify state-level lockdown effectiveness and preference for enforcing stringent containment strategies during the COVID-19 pandemic. We validate our estimated policy measures using external data.
Simulations and regression-based analyses show that not-for-profit nursing homes are much more likely to be sent into lockdown, which results in for-profit nursing homes occupying more central positions in social networks. In addition, lockdown effectiveness interacts significantly with the ownership status of a nursing home to determine COVID-19 death among residents. In particular, the difference in COVID-19 deaths between for-profit and not-for-profit nursing homes rises with lockdown effectiveness; a one standard deviation increase in the effectiveness of lockdown intensifies the death gap by around 23 percent relative to the mean. Our analysis implies that the structure of markets and their heterogeneity in experiencing uncertain shocks can help policymakers design optimal targeted interventions for future pandemics.

Funding Information: None.

Declaration of Interests: None.

Keywords: Profits, Pandemics, Social networks, Lockdown effectiveness, Equilibrium, Nursing homes

Suggested Citation

Pongou, Roland and Sidie, Ghislain Junior and Tchuente, Guy and Tondji, Jean-Baptiste, Profits, Pandemics, and Lockdown Effectiveness: Theory and Evidence from Nursing Home Networks. Available at SSRN: https://ssrn.com/abstract=4231199 or http://dx.doi.org/10.2139/ssrn.4231199

Roland Pongou

University of Ottawa - Department of Economics ( email )

200 Wilbrod Street
Ottawa, Ontario K1N 6N5
Canada

Ghislain Junior Sidie

University of Ottawa ( email )

120 University, Social Sciences Building Ottawa
Ottawa, Ontario K1N 6N5
Canada

Guy Tchuente

University of Kent ( email )

Keynes College, University of Kent
Canterbury, Kent CT2 7NP
United Kingdom

HOME PAGE: http://https://www.kent.ac.uk/economics/staff/profiles/guy-tchuente.html

Jean-Baptiste Tondji (Contact Author)

University of Texas Rio Grande Valley (UTRGV) (Formerly University of Texas-Pan American) - Economics and Finance ( email )

1201 W. University Dr.
Edinburg, TX
United States

Department of Economics and Finance, University of Texas Rio Grande Valley ( email )

1201 W. University Drive
Edinburg, TX 78541
United States
956-665-2825 (Phone)

HOME PAGE: http://https://sites.google.com/site/jbtondjicom

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