CEPR & IHEID | COVID Economics series
CEPR Webinar COVID series

A Simple Planning Problem for COVID-19 Lockdown

Francesco Lippi | LUISS University, Einaudi Institute for Economics and Finance
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Webinar streamed via zoom

A Joint CEPR and the Graduate Institute webinar series based on papers in CEPR Covid Economics: Vetted and Real-Time Papers

As part of the Joint webinar series organised by the Department of International Economics and the CEPR,  we are pleased to invite you to an online public talk by Professor Francesco Lippi. He will present his paper

A Simple Planning Problem for COVID-19 Lockdown

coauthored with Fernando E. Alvarez and David Argente, issued in April this year.

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Abstract: We study the optimal lockdown policy for a planner who wants to control the fatalities of a pandemic while minimizing the output costs of the lockdown. We use the SIR epidemiology model and a linear economy to formalize the planner's dynamic control problem. The optimal policy depends on the fraction of infected and susceptible in the population. We parametrize the model using data on the COVID19 pandemic and the economic breadth of the lockdown. The quantitative analysis identifies the features that shape the intensity and duration of the optimal lockdown policy. Our baseline parametrization is conditional on a 1% of infected agents at the outbreak, no cure for the disease, and the possibility of testing. The optimal policy prescribes a severe lockdown beginning two weeks after the outbreak, covers 60% of the population after a month, and is gradually withdrawn covering 20% of the population after 3 months. The intensity of the lockdown depends on the gradient of the fatality rate as a function of the infected, and on the assumed value of a statistical life. The absence of testing increases the economic costs of the lockdown, and shortens the duration of the optimal lockdown which ends more abruptly. Welfare under the optimal policy with testing is higher, equivalent to a one-time payment of 2% of GDP.


Covid  Economics,  Vetted  and  Real-Time  Papers,  from  CEPR,  brings  together  formal   investigations   on   the   economic   issues   emanating   from   the   Covid   outbreak,  based  on  explicit  theory  and/or  empirical  evidence,  to  improve  the  knowledge base.

Founder: Beatrice Weder di Mauro, President of CEPR ; Editor: Charles Wyplosz, Graduate Institute Geneva and CEPR.