Our researcher Luiz Brotherhood, together with Philipp Kircher, Cezar Santos, and Michèle Tertilt, has published the article “Optimal Age-based Policies for Pandemics: An Economic Analysis of Covid-19 and Beyond ” in The Review of Economic Studies, one of the world’s leading economics journals.
What is the right policy response to a pandemic? The answer depends on more than how contagious or deadly a virus is. It also requires understanding who faces the greatest risks, how people voluntarily adapt their behaviour, and whether they can protect themselves without giving up work and other activities.
The authors develop an economic model that captures differences across age groups and allows individuals to choose how much social distancing to undertake, considering future infection risks and the prospect of a vaccine. Using data from the Covid-19 pandemic in the United States, they examine how voluntary precautions, lockdowns and testing affect deaths and economic activity.
One striking finding is the importance of voluntary behaviour. As infection risks increased, people reduced work and leisure activities outside the home, even without government restrictions. The model estimates that these precautions alone would have reduced deaths by 65% relative to a scenario in which individuals did not change their behaviour. Together with the lockdown implemented in the US, the reduction reached 80%.
The study also shows why age matters for policy. Older people face a much higher risk of death and therefore have stronger incentives to protect themselves. Younger people face lower personal health risks and take fewer precautions, while their work and social activities can increase infection risks for others.
Accounting for these externalities, the model suggests that the optimal lockdown would have been stricter than the one implemented in the US, with relatively greater restrictions on younger people. By reducing transmission, this policy would have lowered deaths in both age groups while allowing older people to spend more time outside their homes.
However, there is no single optimal response to every pandemic. Population age, opportunities for remote work, mortality differences across age groups and infectiousness all influence policy. More contagious viruses call for stronger restrictions, but greater deadliness does not necessarily require stricter lockdowns when those most at risk already take substantial precautions.
Testing provides another important policy tool. Better information about infections can reduce transmission, deaths and economic losses. The authors find that expanding US testing capacity faster would have allowed restrictions to be relaxed earlier.
The broader message is that effective pandemic policy must bring epidemiology and economics together: policymakers need to consider who spreads the disease, who bears its health risks, how individuals respond voluntarily, and how information about infections changes their behavior.
Congratulations to Luiz and his co-authors on this outstanding publication and their contribution to understanding pandemic policy!
