Social distancing in Macroeconomic Models - Yoseph Y. Getachew - ERSA working paper 844

The decrease in the infection and fatality rates translates to a positive impact on the economy due to the boost in the labor supply. [...] With the latter, at the peak of the epidemic, only 0.74% of the susceptible individuals get infected and 2.43% of them die; however, with the laissez-faire social distancing, 11.43% of the susceptible individuals get infected and 17% of them die. [...] When comparing between a more and a less strict lockdown, a more strict lockdown leads to a relatively higher welfare loss at the early stage of the epidemic; however, during and after the peak of the infection, it leads to a relatively lower welfare loss as some of the welfare loss are o¤set by the life-savings e¤ects of the lockdown. [...] The basic reproduction number for the SIVTR model is 1 ! !" R0 = (1 v) 0 + (29) + The rst term in the big bracket is the average number of periods that an infected individual spends in the infected compartment; the second is the fraction of infected individuals who receive treatment. [...] The latter represents the long term macroeconomic e¤ect of voluntary social distancing, which is the result of the decline in the fatality rate.