Mobilty Decisions, Economic Dynamics and Epidemic

Giorgio Fabbri, Salvatore Federico, Davide Fiaschi and Fausto Gozzi
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Salvatore Federico: Università degli studi di Genova

No 2021017, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: In this paper we propose a theoretical model including a susceptible-infectedrecovered-dead (SIRD) model of epidemic in a dynamic macroeconomic general equilibrium framework with agents' mobility. The latter affect both their income (and consumption) and their probability of infecting and of being infected. Strategic complementarities among individual mobility choices drive the evolution of aggregate economic activity, while infection externalities caused by individual mobility affect disease diffusion. Rational expectations of forward looking agents on the dynamics of aggregate mobility and epidemic determine individual mobility decisions. The model allows to evaluate alternative scenarios of mobility restrictions, especially policies dependent on the state of epidemic. We prove the existence of an equilibrium and provide a recursive construction method for finding equilibrium(a), which also guides our numerical investigations. We calibrate the model by using Italian experience on COVID-19 epidemic in the period February 2020 - May 2021. We discuss how our economic SIRD (ESIRD) model produces a substantially different dynamics of economy and epidemic with respect to a SIRD model with constant agents' mobility. Finally, by numerical explorations we illustrate how the model can be used to design an efficient policy of state-of-epidemic-dependent mobility restrictions, which mitigates the epidemic peaks stressing health system, and allows for trading-off the economic losses due to reduced mobility with the lower death rate due to the lower spread of epidemic

Keywords: Strategic complementarities; ESIRD; COVID-19; Mitigation policies; Pandemic possibilities frontier (search for similar items in EconPapers)
JEL-codes: C62 C72 C73 E1 H0 I1 (search for similar items in EconPapers)
Pages: 31
Date: 2021-07-09
New Economics Papers: this item is included in nep-dge and nep-mac
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https://sites.uclouvain.be/econ/DP/IRES/2021017.pdf (application/pdf)

Related works:
Journal Article: Mobility decisions, economic dynamics and epidemic (2024)
Working Paper: Mobility decisions, economic dynamics and epidemic (2024)
Working Paper: Mobility decisions, economic dynamics and epidemic (2023)
Working Paper: Mobility Decisions, Economic Dynamics And Epidemic (2022)
Working Paper: Mobility decisions, economic dynamics and Epidemic (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:2021017

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