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Covid-19 contagion, economic activity and business reopening protocols (Macro-Finance Cluster)

Tuesday 3 November 2020, 2.00PM to 3.00 pm

Speaker(s): Alexandre Janiak (Pontificia Universidad Catolica de Chile)

Abstract: This paper studies the impact of sanitary protocols aimed at reducing the contagion by Covid-19 during the production and consumption of goods and services. We augment a heterogeneous SIRD model with a two-way feedback between contagion and economic activity, allowing for firm and sector heterogeneity. While protocols are a burden for firms (especially SMEs), they may enhance economic activity if infected workers do not drop out of the labor force. Using Chilean data, we calibrate the model and assess the impact of recommended firm protocols on contagion and economic activity in the after-lockdown period. Our quantitative results suggest that: (i) A second wave of infections is likely absent any firm protocols; (ii) Protocols targeted at some sectors can reduce deaths while at the same time improving economic conditions; (iii) Protocols applied widely have a negative effect on the economy. We also find that applying strict protocols to a few sectors is generally preferable than applying mild protocols to a larger number of sectors, both in terms of health and economic benefits.

Authors: Alexandre Janiak, Caio Machado and Javier Turen


Location: zoom link to follow

Admission: All welcome