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Macroeconomic consequences of stay-at-home policies during the COVID-19 pandemic

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  • Bairoliya, Neha
  • İmrohoroğlu, Ayşe

Abstract

Risks related to the coronavirus infection differ significantly across the age and the health status of individuals which suggest lockdowns targeting the unhealthy could reduce the fatalities due to the pandemic. In addition, labor productivities differ significantly across these groups, which suggest the economic consequences of targeted lockdowns could be quite different. Using an overlapping generations model with rich heterogeneity, we show that a targeted lockdown policy based on preexisting health status would have reduced the economic severity of the pandemic by 43% compared to a random lockdown. A simple system where government transfers are paid to those who stay home, financed by lump-sum taxes, could have achieved results similar to this health based lockdown.

Suggested Citation

  • Bairoliya, Neha & İmrohoroğlu, Ayşe, 2023. "Macroeconomic consequences of stay-at-home policies during the COVID-19 pandemic," European Economic Review, Elsevier, vol. 152(C).
    • Handle: RePEc:eee:eecrev:v:152:y:2023:i:c:s0014292122001568
    DOI: 10.1016/j.euroecorev.2022.104266
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