Demonstrated risk preferences and COVID-19 regulations in the United States

Peter Anderson ()
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Peter Anderson: University of Nottingham

Public Choice, 2025, vol. 203, issue 1, No 4, 53-75

Abstract: Abstract Research has pointed towards U.S. state officials setting COVID regulations based on their constituents’ political affiliation. But a further explanation is needed as prior to 2020, U.S. voters did not choose their political party in accord with how they thought politicians would act in a pandemic. In contrast, other papers have found that people with higher risk preferences took fewer mitigating actions during COVID. Building on these results and the public choice view that political markets lack a dynamic-feedback process, this paper hypothesizes that upcoming elections incentivized state officials to partially set regulations in congruence with their constituents’ demonstrated risk preferences. The hypothesis is tested with a balanced panel of all U.S. states over seven time periods ranging from April until shortly before the 2020 election. A log-linear hybrid model finds a negative relationship between risky actions and the stringency of COVID regulations at the between-state level. The relationship is statistically and regulatorily significant while controlling for relevant time-varying and time-invariant health, political, and economic measures. Multiple robustness tests confirm these results, including instrumenting people’s risky actions. At the within-state level, regulations only varied with changes in revealed risk preferences when governors faced impending feedback from a reelection contest. Republican governors running for reelection decreased regulations when revealed risk taking increased whereas their Democratic counterparts responded by increasing regulations. In states without a gubernatorial election, regulations show little responsiveness to changes in risk taking, corroborating the public choice viewpoint.

Keywords: COVID-19; Regulatory federalism; State-level regulations; Risk preference (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11127-024-01185-x

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