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Working Paper

Information and Inequality in the Time of a Pandemic

We introduce two types of agent heterogeneity in a calibrated epidemiological search model. First, some agents cannot afford to stay home to minimize virus exposure. Our results show that poor agents bear most of the epidemic’s health costs. Furthermore, we show that when a larger share of agents fail to change their behavior during the epidemic, a deeper recession is possible. Second, agents develop symptoms heterogeneously. We show that for diseases with a higher share of asymptomatic cases, even when less lethal, health and economic outcomes are worse. Public policies such as testing, quarantining, and lockdowns are particularly beneficial in economies with larger shares of poor agents. However, lockdowns lose effectiveness when a larger share of the agents take voluntary precautions to minimize virus exposure independent of the lockdown.

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.

Suggested Citation

Dizioli, Allan, and Roberto B. Pinheiro. 2020. “Information and Inequality in the Time of a Pandemic.” Federal Reserve Bank of Cleveland, Working Paper No. 20-25.