Pandemic Lockdown: The Role of Government Commitment / Christian A. Moser, Pierre Yared.

Format:

Book

Author/Creator:

Moser, Christian A.

Contributor:

National Bureau of Economic Research.

Yared, Pierre.

Series:

Working Paper Series (National Bureau of Economic Research) no. w27062.

NBER working paper series no. w27062

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

This paper studies lockdown policy in a dynamic economy without government commitment. Lockdown imposes a cap on labor supply, which improves health prospects at the cost of economic output. A government would like to commit to the extent of future lockdowns in order to guarantee an economic outlook that supports efficient levels of investment into intermediate inputs. However, such a commitment is not credible since investments are sunk at the time when the government chooses a lockdown. As a result, lockdown under lack of commitment deviates from the optimal policy. Rules that limit a government's lockdown discretion can improve social welfare, even in the presence of noncontractible information. Quantitatively, lack of commitment causes lockdown to be significantly more severe than is socially optimal. The output loss due to lack of commitment is greater for higher social discount rates, higher values of life, higher disease transmission rates, higher intermediate input shares, and longer vaccine arrival times.

Notes:

Print version record

April 2020.