Via VOX EU

Countries are facing stark choices now: end the lockdown to revive people’s lives and re-start the economy but risk the ravages of the COVID-19 pandemic, or prolong the lockdown and inflict more heavy damage on people’s lives and on the economy. The major topic of discussion now is an exit strategy, i.e. how to phase out the lockdown.

The difficulty is finding a strategy that lessens this terrible trade-off – a task made all the more difficult as large-scale testing is not available in many affected countries. Serological testing to detect immunity still struggles with reliability, making it challenging to identify sub-populations that may be allowed out of the lockdown and to determine how long the other groups need to remain sequestered.

Economists have been presenting highly painful scenarios. Toda (2020) argues that to be effective, suppression measures are needed for a prolonged period, perhaps far exceeding 12 weeks, but that this is economically unsustainable.

There is a way out, though. Our teams at the Weizmann Institute of Science in Israel, led by Uri Alon and Ron Milo, have identified a vulnerability in the coronavirus mechanism that can be exploited for an exit strategy: most infected people are not infectious in the first three days − the latent period. They are close to peak infectiousness for about 3–5 days thereafter. Thus, a work/lockdown cycle, such as a 4-day work and 10-day lockdown schedule, allows most of those infected during work days to reach maximal infectiousness during lockdown and avoid infecting many others. Those with symptoms can be infectious for longer but they would remain hospitalised, isolated, or quarantined along with their household members, preventing secondary infections outside the household.

One may go a step further and undertake a staggered cyclic strategy, where the population is divided into two sets of households that work on alternating weeks, each with a 4-day work and 10-day lockdown schedule. The staggered strategy has the advantage that production can continue throughout the month and transmission during workdays is reduced due to lower density, whereas the non-staggered strategy has the advantage that lockdown days are easier to enforce. The full details of the biological–epidemiological issues and the policy design, including stochastic simulations and parameter sensitivity analyses, are in Karin et al. (2020).

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Needless to say, the economic costs of the COVID-19 pandemic and its attendant mitigation measures are very high. Ludvigson et al. (2020) state that:

…we find that the macroeconomic impact of COVID19 is larger than any catastrophic event that has occurred in the past four decades. Even under a fairly favourable scenario of a three month, 60 standard deviation shock, the estimates suggest that there will be a peak loss in industrial production of 5.82% and in service sector employment of 2.63% respectively, which translates into a cumulative ten-month loss in industrial production of 12.75% and an employment loss of nearly 17%, or 24 million jobs, before recovery starts.

Nowcast estimates for France by the Institut National de la Statistique et des Études Économiques (INSEE) for a period when the country was on tight lockdown (published on 9 April 2020) stood at a loss of over a third of GDP (–36%). In the mainly market sectors (which represent 78% of GDP), the loss of activity is estimated at –42% (INSEE, 2020). An estimate by the UK Office for Budget Responsibility put the second-quarter UK GDP decline at 35% (UK Office for Budget Responsibility 2020). Forecasts by the IMF (IMF 2020), central banks, and investment banks speak of declines in the whole of 2020, including a recovery phase, of 6%–12% of GDP. This is based on fairly optimistic scenarios of lockdown phase-out and resumption of normal activity.

The cyclic exit strategy from these lockdowns, proposed here, has at least two major effects.

First, it provides for a partial release from the lockdown, enabling more production and consumption. This has positive effects in terms of predictability, production projections and sharing, consumption planning, and more. For countries or regions where the informal sector has a high share, the cyclic strategy can make lockdown days more bearable and hence enhance adherence.

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The staggered version of the cyclic scheme alleviates some potential problems of disruptions in production continuity. This version has the advantage that production can continue throughout the month and transmission during workdays is reduced due to lower density, whereas the non-staggered strategy has the advantage that lockdown days are easier to enforce.

Second, by the dephasing effect that takes advantage of the latent period of the virus, it engenders relatively good health outcomes as well as beneficial non-COVID-related health effects. For example, lack of various kinds of medical testing such as colonoscopies or mammography, disruptions in treatment such as for blood pressure, and lack of routine medical maintenance (dentistry, family medicine) create sizeable morbidity. The cyclic strategy can relieve these costs by lessening the disruptions.

It should also be recalled that big-scale economic events, engendering prolonged, deep recessions, may lead to severe health issues including mental health problems and even death (for example, see the recent review by Case and Deaton [2020] on economic and social processes that have engendered such outcomes).

The cyclic strategy has the potential to lighten the harsh trade-off faced by policymakers. The essential mechanisms here are as follows: policy and economic behaviour influence the reproductive number, Rt, and worker participation in employment. Health and economic outcomes thus depend on the interaction between three dynamic paths:

a. Transmission, measured by Rt

b. Worker actual productivity (depending on employment accessibility)

c. Stop-start policy on lockdowns, dependent on the rate of infection and on ICU capacity

Better economic outcomes will be achieved the lower is the path of Rt (point a), the higher is actual productive employment (point b), and the fewer lockdown recurrences there are (point c).

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In this setup, the proposed cyclic strategy has the following expected effects:

  • It increases economic activity, as it releases part of the lockdown.
  • By preventing resurgences, it reduces the number of COVID-19 cases in the medium and long terms. The latent period idea serves to optimally determine the lockdown phase of the cyclic strategy by minimising effective Rt. It is purposefully designed to generate an effective Rt lower than 1. Hence it operates to lower the path of Rt, point a above.
  • Any comparison to actual lockdowns depends on the relations between the three dynamic paths in the cyclic strategy and in the actual policy strategy. In certain relationships, the cyclic strategy can even improve health outcomes relative to existing lockdown outcomes.

To conclude, the cyclic strategy, utilising the latent period of the coronavirus to optimise the cycle of work and lockdown, is a way to significantly ameliorate the health–economic trade-offs faced by policymakers. It is a workable proposal that can be implemented at the micro (firm, educational establishment, etc.), regional, and macroeconomic levels. This is a call for immediate action.

References

Case, Anne, and Angus Deaton (2020), Deaths of despair and the future of capitalism, Princeton: Princeton University Press.

IMF (2020), “World economic outlook, April 2020: Chapter 1“, April

INSEE (2020), “Economic Outlook 2020“, 9 April

Karin, Omer, Yinon M Bar-On, Tomer Milo, Itay Katzir, Avi Mayo, Yael Korem, Avichai Tendler, Boaz Dudovich, Eran Yashiv, Amos J Zehavi, Nadav Davidovitch, Ron Milo and Uri Alon (2020), “Adaptive cyclic exit strategies from lockdown to suppress COVID-19 and allow economic activity”, MedRxiv.

Ludvigson, Sydney C, Sai Ma, and Serena Ng (2020), “COVID-19 and the macroeconomic effects of costly disasters”, NBER Working Paper 26987.

Toda, Alexis Akira (2020), “Early draconian social distancing may be suboptimal for fighting the COVID-19 epidemic”, VoxEU.org, 21 April.

UK Office for Budget Responsibility (2020), “Coronavirus reference scenario“, 14 April