The Political Economy of Responses to Covid-19 in the U.S.A

54 Pages Posted: 22 Mar 2021 Last revised: 2 Aug 2024

See all articles by Zhihan Cui

Zhihan Cui

Columbia University

Geoffrey M. Heal

Columbia University - Columbia Business School, Finance; National Bureau of Economic Research (NBER)

Howard Kunreuther

National Bureau of Economic Research (NBER); University of Pennsylvania - Wharton Risk Management and Decision Processes Center

Lu Liu

Columbia University - Columbia Business School

Date Written: March 2021

Abstract

Social distancing via shelter-in-place strategies, and wearing masks, have emerged as the most effective non-pharmaceutical ways of combatting COVID-19. In the United States, choices about these policies are made by individual states. We develop a game-theoretic model and then test it econometrically, showing that the policy choices made by one state are strongly influenced by the choices made by others. If enough states engage in social distancing or mask wearing, they will tip others that have not yet done so to follow suit and thus shift the Nash equilibrium. If interactions are strongest amongst states of similar political orientations there can be equilibria where states with different political leanings adopt different strategies. In this case a group of states of one political orientation may by changing their choices tip others of the same orientation, but not those whose orientations differ. We test these ideas empirically using probit and logit regressions and find strong confirmation that inter-state social reinforcement is important and that equilibria can be tipped. Policy choices are influenced mainly by the choices of other states, especially those of similar political orientation, and to a much lesser degree by the number of new COVID-19 cases. The choice of mask-wearing policy shows more sensitivity to the actions of other states than the choice of SIP policies, and republican states are much less likely to introduce mask-wearing policies. The choices of both types of policies are influenced more by political than public health considerations.

Suggested Citation

Cui, Zhihan and Heal, Geoffrey M. and Kunreuther, Howard C. and Kunreuther, Howard C. and Liu, Lu, The Political Economy of Responses to Covid-19 in the U.S.A (March 2021). NBER Working Paper No. w28578, Available at SSRN: https://ssrn.com/abstract=3809549

Zhihan Cui (Contact Author)

Columbia University

3022 Broadway
New York, NY 10027
United States

Geoffrey M. Heal

Columbia University - Columbia Business School, Finance ( email )

3022 Broadway
New York, NY 10027
United States
212-854-6459 (Phone)
212-316-9219 (Fax)

HOME PAGE: http://www.gsb.columbia.edu/faculty/gheal/

National Bureau of Economic Research (NBER)

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Howard C. Kunreuther

National Bureau of Economic Research (NBER)

University of Pennsylvania - Wharton Risk Management and Decision Processes Center ( email )

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Suite 130
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United States
215-898-4589 (Phone)

Lu Liu

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

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