Incentive

Labour economics

Philosophy

Statistics

Microeconomics

Social planner

Fatalism

Economics

Computer science

Business

Coronavirus disease 2019 (COVID-19)

Mathematics

Public economics

Externality

Infectious disease (medical specialty)

Sociology

Medicine

Programming language

Consumption (sociology)

Theology

Social distance

Planner

Disease

Replicate

Pathology

Social science

Review of Financial Studies

We study an economy’s response to an unexpected epidemic. The spread of the disease can be mitigated by reducing consumption and hours worked in the office. Working from home is subject to learning-by-doing. Private agents’ rational incentives are relatively weak and fatalistic. The planner recognizes infection and congestion externalities and implements front-loaded mitigation. Under our calibration, the planner reduces cumulative fatalities by 48$\%$ compared to 24$\%$ by private agents, although with a sharper drop in consumption. Our model can replicate key industry and/or occupational-level patterns and explain how large variations in outcomes across regions can stem from small initial differences.

Optimal Mitigation Policies in a Pandemic: Social Distancing and Working from Home