Adaptive cyclic exit strategies from lockdown to suppress COVID-19 and allow economic activity

Omer Karin; Yinon M. Bar-On; Tomer Milo; Itay Katzir; Avi Mayo; Yael Korem; Boaz Dudovich; Amos J. Zehavi; Nadav Davidovich; Ron Milo; Uri Alon

On the supply side, the cyclic alternative substitutes unemployment with part-time employment for many workers. Considering the well-established research literature on the long-term unemployment scarring effect this has important long-term economic and welfare advantages. First, long-term unemployment (6 months or more) leads to human capital depreciation that in turn reduces productivity, employability and wages ( 13 -16 ) . Although lock-downs are not predicted to last a full six months, it is likely that many businesses will not re-open immediately following lockdown termination, would rehire in smaller numbers, or fail to reopen at all. Hence, many workers would face long-term unemployment even if the actual lockdown is significantly shorter. In instances of widespread unemployment, individual workers decline in productivity and could have an aggregate long-term depressing effect on productivity growth in the entire economy ( 17 ) . Long-term unemployment also exerts negative effects on social capital: in this context, the deterioration of social networks that help the unemployed to find appropriate employment opportunities ( 25 ) . Adverse physical and mental effects are also associated with long-term unemployment ( 18 ) .