Firm Behavior during An Epidemic

30 Pages Posted: 10 Aug 2020

See all articles by Luiz Brotherhood

Luiz Brotherhood

University of Barcelona; University of Barcelona - Barcelona Economic Analysis Team (BEAT)

Vahagn Jerbashian

University of Barcelona - Department of Economics; University of Barcelona - Barcelona Economic Analysis Team (BEAT)

Multiple version iconThere are 2 versions of this paper

Date Written: July 30, 2020

Abstract

We derive a model in which firms operate in an epidemic environment and internalize infections among their employees in the workplace. The model is calibrated to fit the properties of the COVID-19 epidemic. We show that firms have incentives to fight against infections and can do so very effectively by increasing teleworking and rotating employees between on-site work, teleworking, and leave. Subsidies to sick leave reduce the cost of sick workers and raise workplace infections. Furlough policies are successful in reducing infections and saving lives. Firms delay and weaken the fight against infections during economic downturns.

Keywords: COVID-19, epidemic, firm behavior, on-site work, policies, teleworking

JEL Classification: C63, D20, D21, I10, I18, L23

Suggested Citation

Brotherhood, Luiz and Jerbashian, Vahagn, Firm Behavior during An Epidemic (July 30, 2020). Available at SSRN: https://ssrn.com/abstract=3666050 or http://dx.doi.org/10.2139/ssrn.3666050

Luiz Brotherhood (Contact Author)

University of Barcelona

University of Barcelona - Barcelona Economic Analysis Team (BEAT) ( email )

Gran Via de les Corts Catalanes
Barcelona, 08007
Spain

Vahagn Jerbashian

University of Barcelona - Department of Economics ( email )

Barcelona
Spain

HOME PAGE: http://vjerbashian.wordpress.com

University of Barcelona - Barcelona Economic Analysis Team (BEAT) ( email )

Gran Via de les Corts Catalanes
Barcelona, 08007
Spain

HOME PAGE: http://vjerbashian.wordpress.com/

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