The Social Cost of Contacts: Theory and Evidence for the COVID-19 Pandemic in Germany

Abstract

Building on the epidemiological SIR model we present an economic model with heterogeneous individuals deriving utility from social contacts creating infection risks. Focusing on social distancing of individuals susceptible to an infection we theoretically analyze the gap between private and social cost of contacts. To quantify this gap, we calibrate the model using German survey data on social distancing and impure altruism from the beginning of the COVID-19 pandemic. The optimal policy reduces contacts drastically in the beginning, to almost eradicate the epidemic, and keeps them at around a third of pre-pandemic levels with minor group-specific differences until a vaccine becomes tangible. Private protection efforts stabilize the epidemic in the laissez faire, though at a prevalence of infections much higher than optimal. Impure altruistic behaviour closes more than a quarter of the initial gap towards the social optimum. Our results suggests that private actions for self-protection and for the protection of others contribute substantially toward alleviating the problem of social cost.

Moral Suasion and the Private Provision of Public Goods: Evidence from the COVID-19 Pandemic

“…On the aggregate level, however, we can check for a systematic difference between stated answers and observed mobility data. In a companion paper (Quaas et al 2020), we examine the trend in cell phone movements in Germany and find a reduction in cell phone movements for that time period which is consistent with the survey answers. Hence, while we cannot rule this out, we do not expect such systematic biases in survey responses.…”

“…This is because they also protect themselves from becoming infectious and thus reduce the risk that they could eventually infect others. Given the large number of susceptible individuals, this is a quantitatively important contribution to the public good (Quaas et al 2020). In addition, we asked for the support for governmental actions and by how much participants reduce their contacts with regard to governmental regulations.…”

“…Epidemiological-economic models show that there is a considerable gap between individually-chosen and socially-optimal behavior (e.g. Acemoglu et al 2020;Farboodi et al 2020;Gerlagh 2020;Quaas et al 2020). That is, the social cost of contacts outweigh the private cost by orders of magnitude (Gerlagh 2020;Quaas et al 2020), qualitatively akin to the case of the social cost of carbon.…”

“…Acemoglu et al 2020;Farboodi et al 2020;Gerlagh 2020;Quaas et al 2020). That is, the social cost of contacts outweigh the private cost by orders of magnitude (Gerlagh 2020;Quaas et al 2020), qualitatively akin to the case of the social cost of carbon. Thus, our analysis is not only of relevance for public health in the COVID-19 pandemic, but the insights may extend to a range of other applications where private actions have external effects-many of them at the heart of environmental economics.…”

The sooner the better? Anxiety and deliberate exposure to COVID-19 risk among young adults in France

“…Finally, in addition to these two categories of anxiety-related motivations -incentives and emotions -compliance with physical distancing norms depends on how much individuals care about the social consequences of their actions 21 . Recent empirical studies reveal that higher levels of social values such as generalised trust, altruism and reciprocity are associated with higher compliance with confinement measures [22][23][24][25][26][27][28] .…”