Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/216636 
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8240
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We embed a lockdown choice in a simplified epidemiological model and derive formulas for the optimal lockdown intensity and duration. The optimal policy reflects the rate of time preference, epidemiological factors, the hazard rate of vaccine discovery, learning effects in the health care sector, and the severity of output losses due to a lockdown. In our baseline specification a Covid-19 shock as currently experienced by the US optimally triggers a reduction in economic activity by two thirds, for about 50 days, or approximately 9:5 percent of annual GDP.
Subjects: 
epidemic
pandemic
lockdown
social distancing
production shortfall
health care system
Covid-19
SIR model
logistic model
JEL: 
I18
Document Type: 
Working Paper
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