The Common Interests of Health Protection and the Economy: Evidence from Scenario Calculations of Covid-19 Containment Policies

We develop a novel approach integrating epidemiological and economic models that allows databased simulations during a pandemic. We examine the economically optimal opening strategy that can be reconciled with the containment of a pandemic. The empirical evidence is based on data from Germany during the Sars-Cov-2 pandemic. Our empirical findings reject the view that there is necessarily a conflict between health protection and economic interests and suggest a non-linear U-shape relationship: it is in the interest of public health and the economy to balance non-pharmaceutical interventions in a manner that further reduces the incidence of infections. Our simulations suggest that a prudent strategy that leads to a reproduction number of around 0.75 is economically optimal. Too restrictive policies cause massive economic costs. Conversely, policies that are too loose lead to higher deaths tolls and higher economic costs in the long run. We suggest this finding as a guide for policymakers in balancing interests of public health and the economy during a pandemic.