UNU-MERIT Working Papers Series
Optimal social distancing in SIR based macroeconomic models
Yoseph Yilma Getachew #2020-034The 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.
Keywords: COVID-19, lockdown, social distancing, macroeconomics, epidemics
JEL Classification: E19, H20, I19
Download the working paper (PDF)
