Optimal lockdown in altruistic economies

Stefano Bosi (1) , Carmen Camacho (2, 3) , David Desmarchelier (4)

1 EPEE - Centre d'Etudes des Politiques Economiques
2 PJSE - Paris Jourdan Sciences Economiques
3 PSE - Paris School of Economics
4 BETA - Bureau d'Économie Théorique et Appliquée

The recent COVID-19 crisis has revealed the urgent need to study the impact of an infectious disease on market economies and provide adequate policy recommendations. In this regard, we consider here the SIS hypothesis in dynamic general equilibrium models with and without capital accumulation, and we compute the efficient lockdown of altruistic agents. We find that the zero lockdown is efficient if agents are selfish, while a positive lockdown is recommended beyond a critical level of altruism. Moreover, the lockdown intensity increases in the degree of altruism. Our robust analytical results are illustrated by numerical simulations, which show, in particular, that the optimal lockdown never trespasses 60% and that eradication is not always optimal.

Keywords: Ramsey model; SIS model; Optimal lockdown

Domains: Economics and Finance

Stefano Bosi, Carmen Camacho, David Desmarchelier. Optimal lockdown in altruistic economies. 2020. ⟨halshs-03231030v1⟩