Recession and recovery from the pandemic

Abstract

We develop an SIR-macroeconomic model with virus detection and inequality to study their implications for economic and health consequences during a pandemic crisis. We find a two-way relationship between the pandemic recession and inequality that exacerbate each other although such a vicious circle could be broken by accurate and extensive testing. This mitigation effect can be improved given complementary arrangements such as social protection. The extensive virus detection could not only be a better alternative intervention to lock-down to break the “life-or-economy” trade-off, but also prevent the economy to be permanently damaged if there is reinfection.

Keywords

• COVID-19
• SIR-macro model
• Testing
• Inequality