IDEAS home Printed from https://ideas.repec.org/p/bca/bocawp/20-50.html
   My bibliography  Save this paper

A Macroeconomic Model of an Epidemic with Silent Transmission and Endogenous Self-isolation

Author

Listed:
  • Antonio Diez de los Rios

Abstract

We study the interaction between epidemics and economic decisions in a model where (1) agents allocate their time to market and home production and social and home leisure, (2) these activities differ in their degree of contagiousness, (3) some infected individuals are indistinguishable from susceptible individuals and (4) agents are not necessarily rational. For baseline parameter values for the COVID-19 pandemic, we find that agents partially self-isolate by allocating more time to home activities and that the effective reproduction number of the disease stabilises at one. Detection and isolation of infected individuals severely mitigate the recession caused by the pandemic.

Suggested Citation

  • Antonio Diez de los Rios, 2020. "A Macroeconomic Model of an Epidemic with Silent Transmission and Endogenous Self-isolation," Staff Working Papers 20-50, Bank of Canada.
    • Handle: RePEc:bca:bocawp:20-50
    as

    Download full text from publisher

    File URL: https://www.bankofcanada.ca/wp-content/uploads/2020/11/swp2020-50.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Robert E. Hall & Charles I. Jones, 2007. "The Value of Life and the Rise in Health Spending," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(1), pages 39-72.
    2. Veronica Guerrieri & Guido Lorenzoni & Ludwig Straub & Iván Werning, 2022. "Macroeconomic Implications of COVID-19: Can Negative Supply Shocks Cause Demand Shortages?," American Economic Review, American Economic Association, vol. 112(5), pages 1437-1474, May.
    3. Xavier Gabaix, 2020. "A Behavioral New Keynesian Model," American Economic Review, American Economic Association, vol. 110(8), pages 2271-2327, August.
    4. George‐Levi Gayle & Andrew Shephard, 2019. "Optimal Taxation, Marriage, Home Production, and Family Labor Supply," Econometrica, Econometric Society, vol. 87(1), pages 291-326, January.
    5. Dirk Krueger & Harald Uhlig & Taojun Xie, 2022. "Macroeconomic dynamics and reallocation in an epidemic: evaluating the ‘Swedish solution’," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 37(110), pages 341-398.
    6. Andrew T. Levin & William P. Hanage & Nana Owusu-Boaitey & Kensington B. Cochran & Seamus P. Walsh & Gideon Meyerowitz-Katz, 2020. "Assessing the Age Specificity of Infection Fatality Rates for COVID-19: Systematic Review, Meta-analysis, & Public Policy Implications," NBER Working Papers 27597, National Bureau of Economic Research, Inc.
    7. Emmanuel Farhi & Xavier Gabaix, 2020. "Optimal Taxation with Behavioral Agents," American Economic Review, American Economic Association, vol. 110(1), pages 298-336, January.
    8. Boragan Aruoba & Morris Davis & Randall Wright, 2016. "Homework in Monetary Economics: Inflation, Home Production, and the Production of Homes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 21, pages 105-124, July.
    9. Glover, Andrew & Heathcote, Jonathan & Krueger, Dirk & Ríos-Rull, José-Víctor, 2023. "Health versus wealth: On the distributional effects of controlling a pandemic," Journal of Monetary Economics, Elsevier, vol. 140(C), pages 34-59.
    10. Jonathan Gruber & Botond Köszegi, 2001. "Is Addiction "Rational"? Theory and Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(4), pages 1261-1303.
    11. Neil M. Ferguson & Derek A. T. Cummings & Christophe Fraser & James C. Cajka & Philip C. Cooley & Donald S. Burke, 2006. "Strategies for mitigating an influenza pandemic," Nature, Nature, vol. 442(7101), pages 448-452, July.
    12. Gans, Joshua Samuel, 2020. "The Economic Consequences of R=1: Towards a Workable Behavioural Epidemiological Model of Pandemics," SocArXiv yxdc5, Center for Open Science.
    13. David Berger & Kyle Herkenhoff & Chengdai Huang & Simon Mongey, 2022. "Testing and Reopening in an SEIR Model," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 43, pages 1-21, January.
    14. Sven Drefahl & Matthew Wallace & Eleonora Mussino & Siddartha Aradhya & Martin Kolk & Maria Brandén & Bo Malmberg & Gunnar Andersson, 2020. "A population-based cohort study of socio-demographic risk factors for COVID-19 deaths in Sweden," Nature Communications, Nature, vol. 11(1), pages 1-7, December.
    15. Benhabib, Jess & Rogerson, Richard & Wright, Randall, 1991. "Homework in Macroeconomics: Household Production and Aggregate Fluctuations," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1166-1187, December.
    16. Karl M. Aspelund & Michael C. Droste & James H. Stock & Christopher D. Walker, 2020. "Identification and Estimation of Undetected COVID-19 Cases Using Testing Data from Iceland," NBER Working Papers 27528, National Bureau of Economic Research, Inc.
    17. Xavier Gabaix, 2014. "A Sparsity-Based Model of Bounded Rationality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(4), pages 1661-1710.
    18. Gronau, Reuben, 1977. "Leisure, Home Production, and Work-The Theory of the Allocation of Time Revisited," Journal of Political Economy, University of Chicago Press, vol. 85(6), pages 1099-1123, December.
    19. Toxvaerd, F.M.O, 2020. "Equilibrium Social Distancing," Cambridge Working Papers in Economics 2021, Faculty of Economics, University of Cambridge.
    20. Callum Jones & Thomas Philippon & Venky Venkateswaran, 2021. "Optimal Mitigation Policies in a Pandemic: Social Distancing and Working from Home [A simple planning problem for covid-19 lockdown]," The Review of Financial Studies, Society for Financial Studies, vol. 34(11), pages 5188-5223.
    21. David Berger & Kyle Herkenhoff & Chengdai Huang & Simon Mongey, 2022. "Testing and Reopening in an SEIR Model," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 43, pages 1-21, January.
    22. Dirk Kruger & Harald Uhlig & Taojun Xie, 2020. "Macroeconomic Dynamics and Reallocation in an Epidemic," Working Papers 2020-43, Becker Friedman Institute for Research In Economics.
    23. Korinek, Anton & Bethune, Zachary, 2020. "COVID-19 Infection Externalities: Trading Off Lives vs. Livelihoods," CEPR Discussion Papers 14596, C.E.P.R. Discussion Papers.
    24. Hunt Allcott & Benjamin B Lockwood & Dmitry Taubinsky, 2019. "Regressive Sin Taxes, with an Application to the Optimal Soda Tax," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(3), pages 1557-1626.
    25. repec:eee:labchp:v:1:y:1986:i:c:p:273-304 is not listed on IDEAS
    26. Gabaix, Xavier, 2015. "Behavioral Macroeconomics Via Sparse Dynamic Programming," CEPR Discussion Papers 11026, C.E.P.R. Discussion Papers.
    Full references (including those not matched with items on IDEAS)

    Citations

    RePEc Biblio mentions

    As found on the RePEc Biblio, the curated bibliography for Economics:
    1. > Economics of Welfare > Health Economics > Economics of Pandemics > Specific pandemics > Covid-19 > Modelling > General Equilibrium

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Miguel Casares & Paul Gomme & Hashmat Khan, 2022. "COVID‐19 pandemic and economic scenarios for Ontario," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(S1), pages 503-539, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. David E. Bloom & Michael Kuhn & Klaus Prettner, 2022. "Modern Infectious Diseases: Macroeconomic Impacts and Policy Responses," Journal of Economic Literature, American Economic Association, vol. 60(1), pages 85-131, March.
    2. David Baqaee & Emmanuel Farhi, 2020. "Nonlinear Production Networks with an Application to the Covid-19 Crisis," NBER Working Papers 27281, National Bureau of Economic Research, Inc.
    3. Mitman, Kurt & Hanley, Douglas & Bognanni, Mark & Kolliner, Daniel, 2020. "Economics and Epidemics: Evidence from an Estimated Spatial Econ-SIR Model," CEPR Discussion Papers 15310, C.E.P.R. Discussion Papers.
    4. Martin S. Eichenbaum & Sergio Rebelo & Mathias Trabandt, 2022. "Inequality in Life and Death," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 70(1), pages 68-104, March.
    5. David Baqaee & Emmanuel Farhi, 2022. "Supply and Demand in Disaggregated Keynesian Economies with an Application to the COVID-19 Crisis," American Economic Review, American Economic Association, vol. 112(5), pages 1397-1436, May.
    6. Marina Azzimonti-Renzo & Alessandra Fogli & Fabrizio Perri & Mark Ponder, 2020. "Pandemic Control in ECON-EPI Networks," Staff Report 609, Federal Reserve Bank of Minneapolis.
    7. Farboodi, Maryam & Jarosch, Gregor & Shimer, Robert, 2021. "Internal and external effects of social distancing in a pandemic," Journal of Economic Theory, Elsevier, vol. 196(C).
    8. Eichenbaum, Martin S. & Rebelo, Sergio & Trabandt, Mathias, 2022. "The macroeconomics of testing and quarantining," Journal of Economic Dynamics and Control, Elsevier, vol. 138(C).
    9. Garriga, Carlos & Manuelli, Rody & Sanghi, Siddhartha, 2022. "Optimal management of an epidemic: Lockdown, vaccine and value of life," Journal of Economic Dynamics and Control, Elsevier, vol. 140(C).
    10. V. V. Chari & Rishabh Kirpalani & Christopher Phelan, 2021. "The Hammer and the Scalpel: On the Economics of Indiscriminate versus Targeted Isolation Policies during Pandemics," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 42, pages 1-14, October.
    11. Martin S Eichenbaum & Sergio Rebelo & Mathias Trabandt, 2021. "The Macroeconomics of Epidemics [Economic activity and the spread of viral diseases: Evidence from high frequency data]," The Review of Financial Studies, Society for Financial Studies, vol. 34(11), pages 5149-5187.
    12. Glover, Andrew & Heathcote, Jonathan & Krueger, Dirk & Ríos-Rull, José-Víctor, 2023. "Health versus wealth: On the distributional effects of controlling a pandemic," Journal of Monetary Economics, Elsevier, vol. 140(C), pages 34-59.
    13. Saki Bigio & Mengbo Zhang & Eduardo Zilberman, 2020. "Transfers vs Credit Policy: Macroeconomic Policy Trade-offs during Covid-19," NBER Working Papers 27118, National Bureau of Economic Research, Inc.
    14. Christopher Cotton & Bahman Kashi & Huw Lloyd‐Ellis & Frederic Tremblay & Brett Crowley, 2022. "Quantifying the economic impacts of COVID‐19 policy responses on Canada's provinces in (almost) real time," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(S1), pages 406-445, February.
    15. Greg Kaplan & Benjamin Moll & Giovanni L. Violante, 2020. "The Great Lockdown and the Big Stimulus: Tracing the Pandemic Possibility Frontier for the U.S," NBER Working Papers 27794, National Bureau of Economic Research, Inc.
    16. Charles A.E. Goodhart & Dimitrios P. Tsomocos & Xuan Wang, 2023. "Support for small businesses amid COVID‐19," Economica, London School of Economics and Political Science, vol. 90(358), pages 612-652, April.
    17. Yasushi Iwamoto, 2021. "Welfare economics of managing an epidemic: an exposition," The Japanese Economic Review, Springer, vol. 72(4), pages 537-579, October.
    18. Yinon Bar-On & Tatiana Baron & Ofer Cornfeld & Eran Yashiv, 2023. "When to Lock, Not Whom: Managing Epidemics Using Time-Based Restrictions," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 292-321, December.
    19. Yinon Bar-On & Tatiana Baron & Ofer Cornfeld & Eran Yashiv, 2023. "When to Lock, Not Whom: Managing Epidemics Using Time-Based Restrictions," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 292-321, December.
    20. Aspri, Andrea & Beretta, Elena & Gandolfi, Alberto & Wasmer, Etienne, 2021. "Mortality containment vs. Economics Opening: Optimal policies in a SEIARD model," Journal of Mathematical Economics, Elsevier, vol. 93(C).

    More about this item

    Keywords

    Coronavirus disease (COVID-19); Economic models;

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • H0 - Public Economics - - General
    • I1 - Health, Education, and Welfare - - Health

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bca:bocawp:20-50. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/bocgvca.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.