Contagion, Migration, and Misallocation in a Pandemic

We present a multi-city migration model to study the endogenous choices of migration during a pandemic and to evaluate various policy alternatives as well. Analytical solutions are provided under the two situations respectively: laissez-faire equilibrium and social optimum. We find that migration rates diverge under these two situations, especially for the infected people. We also provide a new empirical fact: countries with higher COVID-19 mortality disparity across sub-regions tend to have lower nationwide mortality rates. This new fact is inconsistent with the prediction of the traditional misallocation literature, nevertheless is aligned with our theoretical model, which can be seen as an extension of the misallocation framework with cross-region contagion and externality. This research can shed light on policy design under pandemic threat and also help to enrich the misallocation literature