The project Economic Epidemiology of Covid-19 (ECOVID-19) supported by the French National Research Agency

Expertise
A team of researchers propose a comparative cost-effectiveness analysis of public policies during the Covid-19 epidemic in France.
April 11th 2020

The COVID-19 pandemic is first and foremost a human tragedy. But the virus has also hit society hard, disrupting travel, shuttering factories and shaking up economic markets. The public policy measures are unprecedented since the end of the Second World War.

A team of researchers that brings together Raouf Boucekkine (AMU/AMSE)​, Josselin Thuilliez ( CNRS/ Université Paris 1 Panthéon Sorbonne), Jérôme Adda (Université de Bocconi) among other experts on the economics of health epidemics and human behaviors, propose a comparative cost-effectiveness analysis of public policies during the Covid-19 epidemic in France.

How epidemics affect the economic activity?

 

Viruses impose a cost on society, through premature deaths, long-lasting morbidity, increased health-care utilization, and loss of schooling or hours of work. Epidemics may have different consequences on economic activity. First, for obvious health reasons, workers’ activity is limited during the outbreak, all the more if the working age population is more affected. Second, a more pernicious effect on beliefs will lead actors to anticipate or postpone certain economic decisions. Consumption of basic commodities may be accelerated but investment decisions will be postponed. Third, long term effects may appear many decades after such as the effects on human capital accumulation. Lastly, the economic crisis generated by the health crisis may, in turn, have health effects, all the more if social policies are not well developed in a country.

Conversely, economic activity and public policies may have several consequences on the spread of diseases. First, public policy measures such as school closures, quarantines or transport limitations will slow down economic activity, but aims at reducing the cost of epidemics. Second, public policies may also generate perverse incentives that need to be evaluated. From a macro viewpoint, economic activity (measured for instance by unemployment) may have ambiguous effects.

 

What is the most cost-effective strategy ?

 

It is important for the population, policy makers, public health services to assess the management of the crisis. The different affected countries have not adopted the same strategies. The Korean and Japanese strategies, for example, have been very different from those of Italy, Spain or France. Some seem more effective than others but providing robust answer to this question is challenging.

The ECOVID-19 project will compare strategies -combined with the dynamics of the epidemic-  in order to provide evidence-based arguments for the most cost-effective strategy in economic epidemiology perspectives.

Consolidate future epidemics preparedness The principal objective of ECOVID-19 is to provide a comparative analysis of the cost-effectiveness of public policies undertaken during the Covid-19 epidemic in France, analyzing conditions of efficiency and real conditions for implementing information, prevention, care and control actions, providing evaluation and modelling of prevention and control measures.

The project will help answer to these questions in particular:

  • Are confinement measures more cost-effective than testing or simpler prevention methods such as reminders on best practices? Does the timing of intervention matter?
  • What was the role of undocumented infections in France during the outbreak?
  • How individuals and policy makers adapt and learn during a crisis?

 

Epidemiology : what is the added value of economics in this area?

 

There is a long history of quarantines aimed at preventing the spread of diseases, dating back at least to the plague epidemics in Europe and Asia in the Middle Ages; quarantines were also used in Bretagne in 1954 during the smallpox outbreak or selectively during the Ebola outbreak in 2014. There is also an extensive literature evaluating the effect of public health reminders on prevention and treatment. However, massive testing policies have been much less analyzed. Curiously, the optimal combination of testing strategies, reminders and confinement has also been much less examined.

 

In European societies, fully binding measures or tracking procedures were probably difficult to enforce without experience and preparation. People make trade-offs based on the risk of infection, the risk of dying, their environment and the cost of being confined at home. During the Covid-19 epidemic, incivility and disobedience were observed, forcing the authorities to fine. This example suggests that first uncertainty was high to make optimal decisions and second, externalities were not fully considered by individuals. Many experts also argue that aggressive tracking, surveillance and testing might be much more cost-effective than confinement. Although it is clear that we need more testing and surveillance, the optimal timing and combination of confinement, testing and public communication efforts is far from being understood.

 

Economic epidemiology is a field at the intersection of epidemiology and economics that incorporates incentives for healthy behavior and their attendant behavioral responses into an epidemiological context to better understand how diseases are transmitted and could be controlled. Economic epidemiology takes into account externalities. An externality is an economic term referring to a cost or benefit incurred or received by a third party. Including individual trade-offs, learning, and externalities under uncertainty is thus one the main added value of economics in this field of research.

 

The literature in epidemiology has developed models of disease diffusions dating back to Kermack and McKendrick in 1927. However, work in epidemiology provides little theoretical and databased evidence on the cost-effectiveness of policies aiming at reducing population contact rates, or better detection of asymptomatic cases. This is particularly important from a policy maker perspective to implement a comprehensive approach that takes social and economic costs into account to help slowing down Covid-19 transmission and flattening the curve.

 

The economic analysis can also contribute to the understanding of the Covid-19 epidemic through its focus on uncertainty and risk. Indeed, uncertainty and moral hazard are key to understand how epidemics spread and particularly in the case of a new epidemic burst. Keynes in 1921 argues that most individuals would choose a treatment that has been extensively used in the past and has a well-known probability of success, rather than a new one, for which there is little information about its probability of success. Thus it is not granted that the introduction of a new treatment, such as a new vaccine - or any non-compulsory measures - will be used by the population during new epidemics, or whether alternatively, individuals could adopt riskier behaviour even in the presence of good insurance mechanisms.

 

A model of individual behaviour in the face of uncertainty conveyed by the new epidemic shall be built. The key aspect, beside the modelling of the spread of the disease, is the role of beliefs, uncertainty and learning that drive health and economic behaviour. Those in turn affect the propagation of the disease.

 

More info : 

- Read the ECOVID-19 project's proposal

Contacts : 

Raouf Boucekkine (AMU/AMSE) 

- Josselin Thuilliez (CNRS/Université Paris 1 Panthéon-Sorbonne) 

- Jérôme Adda (Université de Bocconi) 

 

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