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Internal and External Effects of Social Distancing in a Pandemic

Author

Listed:
  • Maryam Farboodi

    (Massachusetts Institute of Technology)

  • Gregor Jarosch

    (Princeton University)

  • Robert Shimer

    (University of Chicago)

Abstract

We use a conventional dynamic economic model to integrate individual optimization, equilibrium interactions, and policy analysis into the canonical epidemiological model. Our tractable framework allows us to represent both equilibrium and optimal allocations as a set of differential equations that can jointly be solved with the epidemiological model in a unified fashion. Quantitatively, the laissez-faire equilibrium accounts for the decline in social activity we measure in US micro-data from Safe Graph. Relative to that, we highlight three key features of the optimal policy: it imposes immediate, discontinuous social distancing; it keeps social distancing in place for a longtime or until treatment is found; and it is never extremely restrictive, keeping the effective reproduction number mildly above the share of the population susceptible to the disease.

Suggested Citation

  • Maryam Farboodi & Gregor Jarosch & Robert Shimer, 2020. "Internal and External Effects of Social Distancing in a Pandemic," Working Papers 2020-47, Becker Friedman Institute for Research In Economics.
    • Handle: RePEc:bfi:wpaper:2020-47
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    References listed on IDEAS

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    JEL classification:

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

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