The macroeconomics of age-varying epidemics

• We incorporate age-specific socio-economic interactions in a SIR macroeconomic model to study the role of demographic factors for the COVID-19 epidemic evolution, its macroeconomic effects and possible containment measures. We capture the endogenous response of rational individuals who choose to reduce inter- and intra-generational social interactions, consumption- and labor-related personal exposure to the virus, while not internalizing the impact of their actions on others. We find that social distancing measures targeted to the elderly (who face higher mortality risk and are not part of the labor force) are best suited to save lives and mitigate output losses. The optimal economic shutdown generates small gains in terms of lives saved and large output losses, for any given type of social distancing. These results are confirmed by calibrating the model to match real epidemic and economic data in the context of a scenario exercise.

Subject headings

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

Keyword

Age differences

Containment policies

COVID-19

Demographics

Epidemic

Recessions

SIR macro model

Vaccine

Publication and Content Type

art (subject category)

ref (subject category)