Covid-19 or the coronavirus disease (2019) has, as of now, infected more than 3 million people in 210 countries, while killing more than 200,000. To contain the spread of COVID-19, governments around the world have put in place various containment measures. As entire sectors of the economy have stopped functioning due to these containment measures, the effect on average income has been devastating. Moreover, the uncertainty surrounding the disease has made it difficult to predict the full economic impact once the pandemic subsides. In this paper, Prof. Kunal Dasgupta and Prof. Srinivasan Murali, from the Economics & Social Sciences area at IIMB, integrate a canonical epidemiological model into a general equilibrium framework with high-skill and low-skill workers, each choosing to work either from their work locations (onsite) or from their homes (remote). Onsite and remote labour are imperfect substitutes, but more substitutable for high-skill relative to low-skill workers. Calibrating the model to the Indian economy, the authors find that different containment policies, by restricting onsite labour, disproportionately affects low-skill compared to high-skill workers, thereby worsening the already existing inequality. Furthermore, the containment policies are less effective in controlling disease spread among low-skill workers as they optimally choose to work more onsite in comparison to their high-skill counterparts. Thus, low-skill workers face an excessive burden on both economic and health outcomes, with increased consumption inequality and higher incidence of infections. Read more: https://www.iimb.ac.in/node/7683
Covid-19 or the coronavirus disease (2019) has, as of now, infected more than 3 million people in 210 countries, while killing more than 200,000. To contain the spread of COVID-19, governments around the world have put in place various containment measures. As entire sectors of the economy have stopped functioning due to these containment measures, the effect on average income has been devastating. Moreover, the uncertainty surrounding the disease has made it difficult to predict the full economic impact once the pandemic subsides. In this paper, Prof. Kunal Dasgupta and Prof. Srinivasan Murali, from the Economics & Social Sciences area at IIMB, integrate a canonical epidemiological model into a general equilibrium framework with high-skill and low-skill workers, each choosing to work either from their work locations (onsite) or from their homes (remote). Onsite and remote labour are imperfect substitutes, but more substitutable for high-skill relative to low-skill workers. Calibrating the model to the Indian economy, the authors find that different containment policies, by restricting onsite labour, disproportionately affects low-skill compared to high-skill workers, thereby worsening the already existing inequality. Furthermore, the containment policies are less effective in controlling disease spread among low-skill workers as they optimally choose to work more onsite in comparison to their high-skill counterparts. Thus, low-skill workers face an excessive burden on both economic and health outcomes, with increased consumption inequality and higher incidence of infections. Read more: https://www.iimb.ac.in/node/7683