Information Revelation of Decentralized Crisis Management: Evidence from Natural Experiments on Mask Mandates

64 Pages Posted: 25 Nov 2020

See all articles by Nathan Seegert

Nathan Seegert

University of Utah - Department of Finance

Maclean Gaulin

University of Utah - David Eccles School of Business

Mu-Jeung Yang

David Eccles School of Business, University of Utah

Francisco Navarro-Sanchez

University of Utah

Date Written: November 24, 2020

Abstract

We highlight the importance of signaling effects in determining whether public policy should be implemented at a decentralized or centralized level. For example, although a public policy may have the same direct effect if enacted at a state or county level, people may perceive these policies differently, leading to different indirect effects. We explore this mechanism using the patchwork of mask mandate orders in the U.S. from April to September 2020. State-wide mask mandates stimulate economic activity while also reducing COVID-19 case growth. Surprisingly, county-level mask mandates generally have the opposite effect, depressing economic activity. We argue that different unintended signaling effects can explain these differences in policy effects: households infer from county mask mandates that infection risks have increased in their local area and, therefore, socially distance more and spend less. In contrast, state mask mandates do not lead to similar local inferences, and thus overall, they stimulate the economy.

Keywords: COVID-19, voluntary social distancing, federalism, public information disclosure

JEL Classification: I15, I18, J68, H21, H77

Suggested Citation

Seegert, Nathan and Gaulin, Maclean and Yang, Mu-Jeung and Navarro-Sanchez, Francisco, Information Revelation of Decentralized Crisis Management: Evidence from Natural Experiments on Mask Mandates (November 24, 2020). Available at SSRN: https://ssrn.com/abstract=3736407 or http://dx.doi.org/10.2139/ssrn.3736407

Nathan Seegert (Contact Author)

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States

Maclean Gaulin

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States
801.585.0324 (Phone)

HOME PAGE: http://mgaulin.com

Mu-Jeung Yang

David Eccles School of Business, University of Utah

Francisco Navarro-Sanchez

University of Utah ( email )

1645 E. Campus Center
Salt Lake City, UT 84112
United States

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