The Social Cost of Contacts: Theory and Evidence for the COVID-19 Pandemic in Germany

57 Pages Posted: 5 Jun 2020

See all articles by Martin F. Quaas

Martin F. Quaas

German Centre for Integrative Biodiversity Research (iDiv) Halle-Jena-Leipzig

Jasper Meya

German Centre for Integrative Biodiversity Research (iDiv) Halle-Jena-Leipzig; Department of Economics, University of Leipzig

Hanna Schenk

German Centre for Integrative Biodiversity Research (iDiv) Halle-Jena-Leipzig

Björn Bos

University of Hamburg - Faculty of Business, Economics, and Social Sciences, Students

Moritz A. Drupp

University of Hamburg - Faculty of Business, Economics, and Social Sciences

Till Requate

University of Kiel - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: May 20, 2020

Abstract

Building on the epidemiological SIR model we present an economic model with heterogeneous individuals deriving utility from social contacts creating infection risks. Focusing on social distancing of individuals susceptible to an infection we theoretically analyze the gap between private and social cost of contacts. To quantify this gap, we calibrate the model using German survey data on social distancing and impure altruism from the beginning of the COVID-19 pandemic. We find that the optimal policy reduces contacts drastically in the beginning, to almost eradicate the epidemic, until a vaccine becomes tangible. All groups substantially reduce contacts, and differences between groups are only of secondary importance. Private protection efforts are sufficient to stabilize the epidemic in the laissez faire, though at a prevalence of infections much higher than optimal; impure altruistic behaviour closes around a third of the initial gap towards the social optimum. Overall, our analysis suggests that private actions for self-protection and for the protection of others contribute substantially towards alleviating the problem of social cost.

Note: Funding: Received funding from the German Federal Ministry of Education and Research (BMBF) under grant number 01LC1826E.

Declaration of Interest: Also on behalf of my co-authors, I declare that there is no conflict of interest associated with this study.

Ethical Approval: This study was approved by the institutional review board at University of Hamburg and the European Commission.

Keywords: COVID-19, coronavirus, economic-epidemiology, private public good provision, impure altruism, uncertainty, SIR, social distancing, epidemic control

JEL Classification: I18, D62, D64

Suggested Citation

Quaas, Martin F. and Meya, Jasper and Schenk, Hanna and Bos, Björn and Drupp, Moritz A. and Requate, Till, The Social Cost of Contacts: Theory and Evidence for the COVID-19 Pandemic in Germany (May 20, 2020). Available at SSRN: https://ssrn.com/abstract=3606810 or http://dx.doi.org/10.2139/ssrn.3606810

Martin F. Quaas (Contact Author)

German Centre for Integrative Biodiversity Research (iDiv) Halle-Jena-Leipzig ( email )

Deutscher Platz 5e
Leipzig, 04103
Germany

HOME PAGE: http://www.idiv.de/bioecon

Jasper Meya

German Centre for Integrative Biodiversity Research (iDiv) Halle-Jena-Leipzig ( email )

Deutscher Platz 5e
Leipzig, 04103
Germany

Department of Economics, University of Leipzig ( email )

Leipzig, 04109
Germany

Hanna Schenk

German Centre for Integrative Biodiversity Research (iDiv) Halle-Jena-Leipzig ( email )

Deutscher Platz 5e
Leipzig, 04103
Germany

Björn Bos

University of Hamburg - Faculty of Business, Economics, and Social Sciences, Students ( email )

Hamburg
Germany

Moritz A. Drupp

University of Hamburg - Faculty of Business, Economics, and Social Sciences ( email )

Von-Melle-Park 9
Hamburg, 20146
Germany

Till Requate

University of Kiel - Department of Economics ( email )

Olshausenstrasse 40
24098 Kiel, 24098
Germany
+49 431 880-4424 (Phone)
+49 431 880-1618 (Fax)

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