Externality and policy intervention in interregional travel with infectious diseases

This paper theoretically investigates externalities and policy interventions in travel during a pandemic. We develop a tractable static model of two regions from a short-run perspective. The model shows that the externalities can be both negative and positive, depending on regional asymmetry. Thus, even when infectious diseases are widespread, travel restrictions do not necessarily reduce infections and do not necessarily improve social welfare. A formula for the optimal policy intervention is derived and shown to be the weighted average of four types of externalities defined by the direction of travel and the epidemiological status of a traveler.