DP14778 Political Economy of Crisis Response

Author(s): Arda Gitmez, Konstantin Sonin, Austin L. Wright
Publication Date: May 2020
Date Revised: December 2020
Keyword(s): Bayesian persuasion, compliance, COVID-19, Income inequality, media slant, public health externality
JEL(s): D72, H12, I18, L82
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14778

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.