Disease-economy trade-offs under alternative epidemic control strategies

Abstract

Public policy and academic debates regarding pandemic control strategies note disease-economy trade-offs, often prioritizing one outcome over the other. Using a calibrated, coupled epi-economic model of individual behavior embedded within the broader economy during a novel epidemic, we show that targeted isolation strategies can avert up to 91% of economic losses relative to voluntary isolation strategies. Unlike widely-used blanket lockdowns, economic savings of targeted isolation do not impose additional disease burdens, avoiding disease-economy trade-offs. Targeted isolation achieves this by addressing the fundamental coordination failure between infectious and susceptible individuals that drives the recession. Importantly, we show testing and compliance frictions can erode some of the gains from targeted isolation, but improving test quality unlocks the majority of the benefits of targeted isolation.