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The effect of health and economic costs on governments' policy responses to COVID-19 crisis, under incomplete information

Germà Bel (), Óscar Gasulla () and Ferran A. Mazaira-Font ()
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Óscar Gasulla: Hospital Universitari de Bellvitge – Universitat de Barcelona.
Ferran A. Mazaira-Font: Departament d’Econometria, Estadística I Economia Aplicada- Universitat de Barcelona.

No 202008, IREA Working Papers from University of Barcelona, Research Institute of Applied Economics

Abstract: COVID-19 outbreak has become an unprecedented health, economic and social crisis. We build a theoretical model, based on which we develop an empirical strategy to analyze the drivers of the agility of policy response to the outbreak. Our empirical results show that government overconfidence in its own country capacity of health services and the intensity of expected economic costs from hard measures to manage the crisis delayed policy response. Contrarily, being a game against nature with incomplete information, increased knowledge and reduced uncertainty on other countries’ policy responses and on the epidemic development increased the agility of the country’s policy response.

Keywords: COVID-19; Crisis management; Public policy; Policy response. JEL classification: D81; H12; I18. (search for similar items in EconPapers)
Pages: 33 pages
Date: 2020-06, Revised 2020-06
New Economics Papers: this item is included in nep-hea
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