Mobility decisions, economic dynamics and epidemic

TL;DR

This paper develops a comprehensive model integrating epidemic dynamics with economic behavior, focusing on how individual mobility decisions influence disease spread and economic activity, calibrated with Italian COVID-19 data.

Contribution

It introduces a novel Mean Field Game framework embedding a SIRD epidemic model into a macroeconomic setting with mobility choices, providing a new approach to analyze epidemic-economic interactions.

Findings

Mobility choices significantly impact disease diffusion and economic activity.

The model's equilibrium can be computed recursively, aiding policy analysis.

Calibration with Italian COVID-19 data demonstrates the model's practical relevance.

Abstract

We propose a model, which nests a susceptible-infected-recovered-deceased (SIRD) epidemic model into a dynamic macroeconomic equilibrium framework with agents' mobility. The latter affect both their income and their probability of infecting and being infected. Strategic complementarities among individual mobility choices drive the evolution of aggregate economic activity, while infection externalities caused by individual mobility affect disease diffusion. The continuum of rational forward-looking agents coordinates on the Nash equilibrium of a discrete time, finite-state, infinite-horizon Mean Field Game. We prove the existence of an equilibrium and provide a recursive construction method for the search of an equilibrium(a), which also guides our numerical investigations. We calibrate the model by using Italian experience on COVID-19 epidemic and we discuss policy implications.