The Health and Economic Impacts of COVID-19 and Policy Responses

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Project Summary This project develops, estimates, and simulates a cutting-edge model of the health and economic impacts of the COVID-19 pandemic and policy responses to it. The model has four original features: First, it allows for two-way interactions between infections and economic outcomes. These are important because even though the COVID-19 pandemic is fundamentally a matter of public health, it is essential to account for how the pandemic and the policy responses to it affect the economy and how, in turn, the economic impacts affect health, including mental health. Second, it builds policies into a model that accounts for geosocial spread because the SARS-CoV-2 virus is spread through contact with others and policy decisions in one area affect the rest of the country. Third, it allows for incidence rates that are measured only through imperfect proxies, which is particularly important for modeling the prevalence of the virus early in the pandemic in the U.S. as well as in many parts of the world for the foreseeable future. Lastly, the model accounts for disparate impacts across demographic groups, which is critical given that the pandemic has had dramatically different effects on different demographic groups (e.g., by age, gender, race, ethnicity, and living arrangements). This work extends earlier pilot projects that develop a model with the first and second features. Once complete, the model will make it possible to identify the best sets of economic and health outcomes, including infections and mortality, that could have been achieved and the policies that would have produced to those best-case scenario outcomes. It will make it possible to identify the ways in which actual policies deviated from the best policies. It will also make it possible to rigorously quantify the health and economic costs of deviating from the optimal policies overall and for specific demographic groups. In addition to understanding the ways in which policies and outcomes could have been improved as lessons for future outbreaks and pandemics, the estimates can quantify the cost of vaccination rates stalling beneath herd immunity levels. The model can be applied to different countries and to cross-country analysis, and its features are intended to apply to public health crises more generally, such as the opioid epidemic. The ability to apply the model to other epidemics will allow policy makers to “compare and contrast” the impacts of different epidemics as well as the same epidemic in different locations using a common approach. Additionally, the project conducts several less structured analyses that document the health and labor market impacts of the COVID-19 pandemic and the policy responses to it. This work will generate results of interest in their own right as policy makers weigh and measure the efficacy of public health responses, will help identify key phenomena to incorporate into our model, and will help us to ensure that the qualitative simulation results are robust to a range of plausible parameter estimates.