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Static and dynamic inefficiencies in an optimizing model of epidemics

Garibaldi, Pietro, Moen, Espen R. and Pissarides, Christopher (2020) Static and dynamic inefficiencies in an optimizing model of epidemics. Discussion papers (DP15439). Centre for Economic Policy Research, London, UK.

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Abstract

In an optimizing model of epidemics several externalities arise when agents shield to avoid infection. Optimizing behaviour delays herd immunity but also reduces overall infections to approximately the minimum consistent with herd immunity. For reasonable parameter values, and with no vaccine, we find that agents delay too much because of a “rat race to shield”: they shield too much in the hope that others catch the disease and reach herd immunity. This and other externalities drive large wedges between private and social outcomes. The expectation of a vaccine reverses the effects, and agents shield too little.

Item Type: Monograph (Discussion Paper)
Official URL: https://cepr.org/content/discussion-papers
Additional Information: © 2020 The Authors
Divisions: Economics
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HV Social pathology. Social and public welfare. Criminology
R Medicine > RA Public aspects of medicine > RA0421 Public health. Hygiene. Preventive Medicine
JEL classification: A - General Economics and Teaching > A1 - General Economics > A12 - Relation of Economics to Other Disciplines
D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency; Cost-Benefit Analysis
D - Microeconomics > D6 - Welfare Economics > D62 - Externalities
I - Health, Education, and Welfare > I1 - Health > I10 - General
J - Labor and Demographic Economics > J1 - Demographic Economics > J18 - Public Policy
Date Deposited: 14 Dec 2020 10:42
Last Modified: 22 Dec 2020 00:28
URI: http://eprints.lse.ac.uk/id/eprint/107902

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