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Title: Political Economy of Crisis Response

Author(s): Arda Gitmez, Konstantin Sonin and Austin L. Wright

Publication Date: May 2020

Keyword(s): Bayesian persuasion, compliance, COVID-19, Income inequality, media slant and public health externality

Programme Area(s): Public Economics

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.

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Bibliographic Reference

Gitmez, A, Sonin, K and Wright, A. 2020. 'Political Economy of Crisis Response'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14778