DP14778 Political Economy of Shelter-in-Place Compliance

Author(s): Arda Gitmez, Konstantin Sonin, Austin L. Wright
Publication Date: May 2020
Date Revised: May 2020
Keyword(s): compliance, COVID-19, Income inequality, media slant, shelter-in-place
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 propose a model in which agents with heterogeneous incomes decide whether to comply with shelter-in-place orders or gain additional income at the risk of getting the disease. There is a negative externality of non-compliance as the risk of catching COVID-19 is a function of the number of non-compliers. Drawing on evidence collected during the first months of the 2020 pandemic, we show theoretically that the level of compliance is higher in richer communities, and the effect of inequality on compliance is non-monotonic in the severity of pandemic. Slanted media affect compliance as well: if the media de-emphasizes the threat, compliance falls. At the same time, the demand for such media is higher among those who are less likely to comply.