Expectations, Infections, and Economic Activity

Martin Eichenbaum, Miguel Godinho de Matos, Francisco Lima, Sergio Rebelo and Mathias Trabandt

Journal of Political Economy, 2024, vol. 132, issue 8, 2571 - 2611

Abstract: This paper develops a quantitative theory of how people weigh the risks of infections against the benefits of engaging in social interactions that contribute to the spread of infectious diseases. Our framework takes into account the effects of public policies and private behavior on the spread of the disease. We evaluate the model using a novel micro panel dataset on consumption expenditures of young and older people across the first three waves of COVID-19 in Portugal. Our model highlights the critical role of expectations in shaping how human behavior influences the dynamics of epidemics.

Date: 2024
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Related works:
Working Paper: Expectations, Infections, and Economic Activity (2022)
Working Paper: Expectations, Infections, and Economic Activity (2020)
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