THE FULL RECESSION: PRIVATE VERSUS SOCIAL COSTS OF COVID-19

Abstract

2020 official recession figures ignore the costs associated with the loss of human life due to COVID-19. This article constructs full recession measures that consider the death toll. Our model features nonexpected utility, leisure, age-specific survival rates, and tractable heterogeneity. We find an average full recession of 10.7%, which reflects the net value of an aggregate drop in consumption of 2.7%, an average increase of 197 leisure hours and about 540,000 lives lost in the first pandemic year. The full recession for a utilitarian planner is 14.5%, which aligns with that of individuals in their late 50s.