How should policy responses to the COVID-19 pandemic differ in the developing world?
Alon, Titan; Kim, Minki; Lagakos, David; Vanvuren, Mitchell
This paper quantitatively analyzes how policy responses to the COVID-19 pandemic should
differ in developing countries. To do so we build an incomplete-markets macroeconomic model
with heterogeneous agents and epidemiological dynamics that features several of the key
distinctions between advanced and developing economies germane to the pandemic. We focus in
particular on differences in: age structure, fiscal capacity, healthcare capacity, informality, and
the frequency of contacts between individuals at home, work, school and other locations. The
model predicts that blanket lockdowns are less effective in developing countries, saving fewer
lives per unit of lost GDP. In contrast, age-specific policies are even more effective, since they
focus scarce public funds on shielding the smaller population of older individuals. School
closures are also more effective at saving lives in developing countries, providing a greater
reduction in secondary transmissions between children and older adults at home.
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