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Optimal social distancing in SIR based macroeconomic models

Author

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  • Getachew, Yoseph

    (Department of Economics, University of Pretoria)

Abstract

The paper introduces voluntary social distancing to the canonical epidemiology model, integrated into a conventional macroeconomic model. The model is extended to include treatment, vaccination, and government-enforced lockdown. Infection-averse individuals face a trade-off between a costly social distancing and the risk of getting infected and losing next-period labour income. We find an individual's social distancing is proportional to the welfare loss she incurs when moving to the infected compartment. It increases in the individual's psychological discount factor but decreases in the probability of receiving a vaccination. Quantitatively, a laissez-faire social distancing flattens the infection curve that minimizes the economic damage of the epidemic. A government-enforced social distancing is more effective in flattening the infection curve but has a detrimental effect on the economy.

Suggested Citation

  • Getachew, Yoseph, 2020. "Optimal social distancing in SIR based macroeconomic models," MERIT Working Papers 2020-034, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    • Handle: RePEc:unm:unumer:2020034
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    File URL: https://unu-merit.nl/publications/wppdf/2020/wp2020-034.pdf
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    References listed on IDEAS

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    Cited by:

    1. George, Ammu & Li, Changtai & Lim, Jing Zhi & Xie, Taojun, 2021. "From SARS to COVID-19: The evolving role of China-ASEAN production network," Economic Modelling, Elsevier, vol. 101(C).
    2. Basu Parantap & Bell Clive & Edwards Terence Huw, 2022. "COVID Social Distancing and the Poor: An Analysis of the Evidence for England," The B.E. Journal of Macroeconomics, De Gruyter, vol. 22(1), pages 211-240, January.

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    More about this item

    Keywords

    COVID-19; corona virus; pandemic; lockdown; social distancing; macroeconomics; epidemics;
    All these keywords.

    JEL classification:

    • E19 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Other
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • I19 - Health, Education, and Welfare - - Health - - - Other

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