Consumption Shifting, Working from Home, and the Hidden Losers of Infection Mitigation in Pandemic Times

Sammanfattning: We construct a heterogeneous agent model exploring the intersection of economic behavior and epidemiological risk during a pandemic. The model combines realistic infection dynamics with an economic block where utility maximizing agents shift behavior to avoid infection risk. Agents work in one of four occupations, differing in the contagiousness of the goods they produce, and in the productivity of working from home. The model contributes to understanding the mechanisms behind empirical observations of the heterogeneous impacts of the recent pandemic, providing insight on what groups might need special support in these special times. In particular, we find consumption to shift away from social interaction intensive goods, resulting in a negative demand shock on social sector workers. On the opposite, workers producing goods less associated with infection risk are relatively better off in pandemic times. Adding to this heterogeneity, workers also differ in their ability to simultaneously stay productive and avoid workplace infection risk, causing further divergence in impacts across groups, especially in the case of a lockdown.