Firm behavior during an epidemic

Area of Science:

• Epidemiology
• Labor Economics
• Public Health Policy

Background:

• Businesses operate within epidemic environments, facing the challenge of internalizing employee infections.
• The COVID-19 pandemic highlighted the critical link between workplace dynamics and public health outcomes.
• Understanding firm-level responses to epidemics is crucial for effective public health strategies.

Purpose of the Study:

• To develop and calibrate an economic model of firm behavior during epidemics.
• To analyze the effectiveness of firm-led infection control strategies, such as teleworking and employee rotation.
• To evaluate the impact of government policies, including subsidies for teleworking and sick leave, on infection rates and economic outcomes.

Main Methods:

• Derivation of an economic model incorporating firm operations in an epidemic setting.
• Calibration of the model using empirical data and key epidemiological moments from the COVID-19 pandemic.
• Comparative static analysis to assess the effects of different firm strategies and government policies.

Main Results:

• Firms possess strong incentives to combat workplace infections through measures like increased teleworking and staggered employee schedules.
• These firm-level interventions significantly contribute to flattening the overall infection curve.
• Subsidies promoting teleworking are effective in reducing infections and saving lives, whereas sick leave subsidies can inadvertently increase workplace infections.
• Economic downturns lead firms to delay or reduce their infection control efforts.
• Governments prioritizing life over short-term economic output will implement stricter epidemic restrictions.

Conclusions:

• Firms play a vital role in mitigating epidemics through proactive infection control measures.
• Targeted government subsidies, particularly for teleworking, can yield substantial public health benefits.
• Policy design must carefully consider potential unintended consequences, such as the impact of sick leave subsidies.
• The interplay between economic conditions and public health necessitates adaptive policy responses.
• Balancing economic output and public health requires clear governmental valuation of human life.