Covid-19 and the Golden Rule of Social Distancing

We derive a golden rule of social distancing when new variants of a pandemic continuously enter a country requiring permanent social distancing. The results show that high-income countries should have more social distancing while service economies should have less social distancing. Moreover, vaccination lowers the socially optimal level of social distancing. Using data on infections and death from COVID-19 we find that countries do not follow the golden rule when it comes to income and the importance of the service sector. However, consistent with our model, island economies, which have a lower rate of inflow of new infections, suffer fewer local infections and deaths.