The hammer and the scalpel: On the economics of indiscriminate versus targeted isolation policies during pandemics

•Targeted testing and isolation policies deliver large welfare gains.•Most of these gains come from isolating individuals suspected of being infected rather than testing them.•Welfare gains require good testing and tracking technologies.•Returns to improving tracking technologies large. We develop a...

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Bibliographic Details
Published inReview of economic dynamics Vol. 42; pp. 1 - 14
Main Authors Chari, V.V., Kirpalani, Rishabh, Phelan, Christopher
Format Journal Article
LanguageEnglish
Published Elsevier Inc 01.10.2021
Subjects
Epidemiology
SIR model
Social distancing
E69
H41
Q59
Social distancing
Epidemiology
SIR model
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Summary:•Targeted testing and isolation policies deliver large welfare gains.•Most of these gains come from isolating individuals suspected of being infected rather than testing them.•Welfare gains require good testing and tracking technologies.•Returns to improving tracking technologies large. We develop a simple dynamic economic model of epidemic transmission designed to be consistent with widely used biological models of the transmission of epidemics, while incorporating economic benefits and costs as well. Our main finding is that if the technology for tracking infected individuals is sufficiently good, targeted testing and isolation policies deliver large welfare gains relative to optimal policies when these tools are not available. Much of this welfare gain comes from isolating infected individuals rather than testing them. When the tracking technology is not very good, the gains from targeted testing and isolation are small. The message of our analysis is that the returns to improving tracking technologies are very large.
ISSN:1094-2025
1096-6099
DOI:10.1016/j.red.2020.11.004