DP15107 Caveats for Economists: Epidemiology-Based Modelling of COVID19 and Model Misspecifications

Author(s): Yinon Bar-On, Tatiana Baron, Ofer Cornfeld, Ron Milo, Eran Yashiv
Publication Date: July 2020
Keyword(s): COVID19, optimal policy, the economy and epidemiological dynamics, transmission timescales
JEL(s): H12, I12, I18, J17
Programme Areas: Monetary Economics and Fluctuations
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15107

Rapidly expanding research on COVID19 in Economics typically posits an economy subject to a model of epidemiological dynamics, which is at the core of the analysis. We place this model on the foundations of an epidemiological analysis of the SARS-CoV-2 virus transmission timescales. The contribution is twofold. First, we formulate a full model with epidemiologically-based and clinically-based parameterization. The model features two blocks: an infection transmission block, described by the SEIR-Erlang model, and a clinical block, characterizing the development of symptoms, hospitalization, ICU admission, and recovery or death. The latter is important for the analysis of dynamics of the public health system. Second, we show that there is often serious mis-specification of the model, erroneously characterizing a relatively slow-moving disease, thereby distorting the policymaker decisions towards less severe, delayed intervention. Moreover, the scale of the disease is under-estimated. We also discuss misguided modelling of lockdown policies.