Template-type: ReDIF-Paper 1.0
Author-Name: Getachew, Yoseph
Author-Email: yoseph.getachew@up.ac.za
Author-Workplace-Name: Department of Economics, University of Pretoria
Title: Optimal social distancing in SIR based macroeconomic models
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.
Classification-JEL: E19, H20, I19
Keywords: COVID-19, corona virus, pandemic, lockdown, social distancing,
	 macroeconomics, epidemics
Series: UNU-MERIT Working Papers
Creation-Date: 20200804
Number: 2020-034
File-URL: https://unu-merit.nl/publications/wppdf/2020/wp2020-034.pdf
File-Format: application/pdf
File-Size: 275 Kb
Handle: RePEc:unm:unumer:2020034