Kircher Paper Offers Options for Slowing COVID-19

Combining a long shelter-at-home policy with testing during the pandemic is beneficial for both the elderly and for people ages 20 to 65, according to a new paper co-authored by LDI Professor Philipp Kircher. 

In “An economic model of the Covid-19 pandemic with young and old agents: Behavior, testing and policies,” published by the IZA Institute of Labor Economics, the authors conclude, “Testing and quarantines save lives, even if conducted just on the young, as does separation of activities by age. Combining policies can increase the welfare of both the young and the old.” 

The paper provides a first path to study links between age, incomplete information and COVID-19 testing, and the behavioral adjustments that individuals are making to protect themselves during the pandemic. Masks were not part of the study, published in May.

The authors state, “A striking feature of the Covid-19 pandemic is the difference in death rates by age: those above 65 have a much higher chance of dying than those ages 20 to 65. This raises a number of important points: How much social distancing do these different individuals do? What are the externalities between these age groups? How does that interact with policy; and should one target lockdown or testing to particular subgroups?”

Using the SIR Model for Spread of Disease, Kircher and his co-authors, Luiz Brotherhood, Cezar Santos and Michèle Tertilt, augmented the model with individual choices on work and non-work social distancing, focusing on two age groups – the elderly and the working-age population. Their conclusion derives from the joint simulation of the spread of the disease and how people protected themselves by engaging in fewer social interactions voluntarily. The researchers then embedded particular government policies in that framework.

The group explored combination policies and found that adding a mild shelter-at-home policy –decreasing by 10% to 25% their social interaction while at work or leisure – that remains in place until a vaccine arrives, on top of widespread, but partial, testing, leads to benefits for all age groups. Combining approaches is more effective than testing alone.  

According to Kircher, who is ILR’s Irving M. Ives Professor of Industrial and Labor Relations, “The main novelty is the individuals have a choice to protect themselves. That choice is very simple: infection risk is proportional to the time a person spends outside the house, either working or enjoying leisure. Young people spend more time outside the house in general because they have to work. And they protect themselves less from the disease, as the consequences for them are lower. 

“How well different policies work depends on how people react to them. Policies that drag out the pandemic have some cost for the old, who find it difficult to abstain from social life for so long. Testing is good because we assume that those who test positive react more responsibly, and because it is possible to confine them.”