Political Economy of Crisis Response

54 Pages Posted: 19 May 2020 Last revised: 8 Jun 2020

See all articles by Arda Gitmez

Arda Gitmez

University of Chicago - Harris School of Public Policy

Konstantin Sonin

University of Chicago - Harris School of Public Policy; Higher School of Economics; Centre for Economic Policy Research (CEPR)

Austin L. Wright

University of Chicago - Harris School of Public Policy

Multiple version iconThere are 2 versions of this paper

Date Written: May 30, 2020

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, Bayesian persuasion, compliance, media slant, income inequality

JEL Classification: D72, L82, H12, I18

Suggested Citation

Gitmez, Arda and Sonin, Konstantin and Wright, Austin L., Political Economy of Crisis Response (May 30, 2020). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2020-68, Available at SSRN: https://ssrn.com/abstract=3604320 or http://dx.doi.org/10.2139/ssrn.3604320

Arda Gitmez

University of Chicago - Harris School of Public Policy ( email )

1155 East 60th Street
Chicago, IL 60637
United States

Konstantin Sonin (Contact Author)

University of Chicago - Harris School of Public Policy ( email )

1155 East 60th Street
Chicago, IL 60637
United States

Higher School of Economics ( email )

20 Myasnitskaya street
Moscow, 119017
Russia

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Austin L. Wright

University of Chicago - Harris School of Public Policy ( email )

1155 East 60th Street
Chicago, IL 60637
United States

HOME PAGE: http://www.austinlwright.com

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