VGSF - WU Vienna - LC

Christian Gollier, Toulouse School of Economics

online via Microsoft Teams Live Events 11:00 - 12:00

Organizer VGSF

As part of the ser­ies of the "Fin­ance Re­search Sem­inar", VGSF wel­comes Chris­tian Gol­lier from the Toulouse School of Eco­nom­ics to present his re­search pa­per.
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Cost-be­ne­fit ana­lysis of age-spe­cific de­con­fine­ment strategies

I cal­ib­rate a Mul­ti-Risk SIR model on the covid pan­demic to ana­lyze the im­pact of the age-spe­cific con­fine­ment and PCR test­ing policies on in­comes and mor­tal­ity. Two polar strategies emerge as po­ten­tially op­timal. The sup­pres­sion policy would crush the curve by con­fin­ing 90% of the pop­u­la­tion for 4 months to erad­ic­ate the virus. The flat­ten the-­curve policy would re­duce the con­fine­ment to 30% of the pop­u­la­tion for 5 months, fol­lowed by al­most one year of free cir­cu­la­tion of the virus to at­tain herd im­munity without over­whelm­ing hos­pit­als. Both strategies yield a total cost of around 15% of an­nual GDP when com­bin­ing the eco­nomic cost of con­fine­ment with the value of lives lost. I show that hes­it­at­ing between the two strategies can have a huge so­ci­etal cost, in par­tic­u­lar if the sup­pres­sion policy is stopped too early. Be­cause seni­ors are much more vul­ner­able, a sim­ple re­com­mend­a­tion emerges to shel­ter them as one de­con­fines young and middle-aged people in order to build our col­lect­ive herd im­munity. By do­ing so, one re­duces the death toll of the pan­demic to­gether with the eco­nomic cost of the con­fine­ment, and the total cost is di­vided by a factor 2. I also show that ex­pand­ing the mass test­ing ca­pa­city to screen people sent back to work has a large be­ne­fit un­der vari­ous scen­arios. This ana­lysis is highly de­pend­ent upon deeply un­cer­tain epidemi­olo­gic, so­ci­olo­gical, eco­nomic and eth­ical para­met­ers.

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