Working Paper: CEPR ID: DP14778
Authors: Arda Gitmez; Konstantin Sonin; Austin L. Wright
Abstract: We offer a model in which heterogeneous agents make individual decisions with negative external effects such as the extent of social distancing during pandemics. Because of the externality, the agents have different individual and political preferences over the policy response. Personally, they might prefer a low-level response, yet would vote for a higher one because it deters the others - even if simultaneously decreasing their personal benefits. The effect is even more pronounced in information acquisition: agents would want one level of slant in the information they base their actions on and a different level of slant in public announcements. The model accounts for numerous empirical regularities of the public response to COVID-19.
Keywords: COVID-19; Public Health; Externality; Compliance; Bayesian Persuasion; Media Slant; Income Inequality
JEL Codes: D72; L82; H12; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| local health risks (I12) | compliance with shelter-in-place ordinances (R28) |
| household income (D19) | compliance with shelter-in-place ordinances (R28) |
| healthcare costs (I11) | compliance with shelter-in-place ordinances (R28) |
| individual preferences (D11) | demand for information about pandemic severity (I14) |
| compliance behavior (K40) | type of information consumed (D10) |
| media slant (L82) | compliance behavior (K40) |