Abstract

This paper studies optimal lockdown policies in a dynamic economy without government commitment. A lockdown imposes a cap on labor supply, which lowers economic output but improves health prospects. A government would like to commit to limit the extent of future lockdowns in order to increase investment by supporting a more optimistic economic outlook. However, such a commitment may not be credible since investment decisions are sunk at the time when the government decides on lockdowns. Rules that limit a government’s future policy discretion can improve the efficiency of lockdowns, even in the presence of noncontractible information.

Download PDF

Citation

Moser, Christian, and Pierre Yared. "Pandemic Lockdown: The Role of Government Commitment." Columbia Business School, October 16, 2020.

Each author name for a Columbia Business School faculty member is linked to a faculty research page, which lists additional publications by that faculty member.

Each topic is linked to an index of publications on that topic.