Testing Policies During an Epidemic: an Economic Analysis

I build a stochastic epidemiological model with production and endogenous responses to the epidemic to compare different testing policies to isolate and quarantine the infectious: voluntary tests, random screenings and contact tracing. To increase the number of screened individuals at given testing capacity, I also allow for the use of group testing. Contact tracing with group testing is the best testing policy unless in case of: very contagious diseases, socially dense countries, high test costs and limited testing capacity. The gains include a lower mortality, a smaller output loss, and lower peaks of infections and hospitalizations. I show that sophisticated tracing technologies are not needed to achieve these gains.