Citation

Discussion Paper Details

Please find the details for DP15256 in an easy to copy and paste format below:

Full Details

Title: The Great Lockdown and the Big Stimulus: Tracing the Pandemic Possibility Frontier for the U.S.

Author(s): Greg Kaplan, Benjamin Moll and Giovanni L. Violante

Publication Date: September 2020

Keyword(s):

Programme Area(s): International Macroeconomics and Finance, Labour Economics, Macroeconomics and Growth, Monetary Economics and Fluctuations and Public Economics

Abstract: We provide a quantitative analysis of the trade-offs between health outcomes and the distribution of economic outcomes associated with alternative policy responses to the COVID-19 pandemic. We integrate an expanded SIR model of virus spread into a macroeconomic model with realistic income and wealth inequality, as well as occupational and sectoral heterogeneity. In the model, as in the data, economic exposure to the pandemic is strongly correlated with financial vulnerability, leading to very uneven economic losses across the population. We summarize our findings through a "distributional pandemic possibility frontier," which shows the distribution of economic welfare costs associated with the different aggregate mortality rates arising under alternative containment and fiscal strategies. For all combinations of health and economic policies we consider, the economic welfare costs of the pandemic are large and heterogeneous. Thus, the choice governments face when designing policy is not just between lives and livelihoods, as is often emphasized, but also over who should bear the burden of the economic costs. We offer a quantitative framework to evaluate both trade-offs.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=15256

Bibliographic Reference

Kaplan, G, Moll, B and Violante, G. 2020. 'The Great Lockdown and the Big Stimulus: Tracing the Pandemic Possibility Frontier for the U.S.'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=15256