This paper explores policies in epidemiological model of Covid-19 where individual’s make private social distancing decisions. Individuals differ by age, where the young have lower risk but need to earn a living (though they can telework). In equilibrium the elderly protect themselves much more than the young. An optimal social planner would immediately start a relatively strict lockdown that essentially aims for a no-Covid strategy. Optimal lockdown restricts the young more than the elderly, who get much more slack in the optimal allocation than in the no-policy equilibrium. Testing is very beneficial, and optimal lockdown in the presence of testing needs to be substantially less severe, though still restricts the young more.
An economic model of the Covid-19 pandemic with young and old agents: Behavior, testing and policies
This paper explores policies in epidemiological model of Covid-19 where individual’s of different age (and associated risk) make private social distancing decisions. Social distancing especially by the old is substantial, and the optimal social planner restricts the young more to provide some slack for the old. Costs of this is much lower when there is also testing.