DP14695 An economic model of the Covid-19 epidemic: The importance of testing and age-specific policies

Author(s): Luiz Brotherhood, Philipp Kircher, Cezar Santos, Michèle Tertilt
Publication Date: May 2020
Keyword(s): age-specific policies, COVID-19, social distancing, Testing
JEL(s): C63, D62, E17, I10, I18
Programme Areas: Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14695

This paper investigates the role of testing and age-composition in the Covid-19 epidemic. We augment a standard SIR epidemiological model with individual choices regarding how much time to spend working and consuming outside the house, both of which increase the risk of transmission. Individuals who have flu symptoms are unsure whether they caught Covid-19 or simply a common cold. Testing reduces the time of uncertainty. Individuals are heterogeneous with respect to age. Younger people are less likely to die, exacerbating their willingness to take risks and to impose externalities on the old. We explore heterogeneous policy responses in terms of testing, confinements, and selective mixing by age group.