OUP accepted manuscript

TLDR: In this article , an infectious disease spreads across the network of agents' social and economic contacts and feeds back on the economic dimension of the model through various channels such as employment and consumption demand.

Abstract: Abstract We employ a new macroeconomic–epidemiological agent-based model to evaluate the “lives vs livelihoods” trade-off brought to the fore by coronavirus disease (Covid-19). An infectious disease spreads across the network of agents’ social and economic contacts and feeds back on the economic dimension of the model through various channels such as employment and consumption demand. Under a lockdown (LD) scenario, the model is able to closely reproduce the epidemiological dynamics of the first wave of the Covid-19 epidemic in the Lombardy region of Italy. We find that, in the presence of non-pharmaceutical interventions, there is no trade-off between lives and macroeconomic losses as a stricter LD eventually leads to superior outcomes along both dimensions. We also evaluate the efficacy of various macroeconomic stabilization policies designed to counteract the downturn generated by the epidemic and LD measures. In an agent-based setting we gain additional insights on the way in which such policies impact not only on gross domestic product but also, for instance, on firms’ defaults and relative prices. Liquidity support for firms, a short-time working scheme with compensation for workers, and direct transfer to households stand out as the most effective policy tools.