How do People Respond to Small Probability Events with Large, Negative Consequences?

Medientyp: E-Book

Titel: How do People Respond to Small Probability Events with Large, Negative Consequences?

Beteiligte: Eichenbaum, Martin S. [VerfasserIn]; de Matos, Miguel Godinho [Sonstige Person, Familie und Körperschaft]; Lima, Francisco [Sonstige Person, Familie und Körperschaft]; Rebelo, Sergio [Sonstige Person, Familie und Körperschaft]; Trabandt, Mathias [Sonstige Person, Familie und Körperschaft]

Körperschaft: National Bureau of Economic Research

Erschienen: Cambridge, Mass: National Bureau of Economic Research, 2020

Umfang: 1 Online-Ressource; illustrations (black and white)

Sprache: Englisch

DOI: 10.3386/w27988

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Reproduktionsnotiz: Hardcopy version available to institutional subscribers

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Anmerkungen: System requirements: Adobe [Acrobat] Reader required for PDF files
Mode of access: World Wide Web

Beschreibung: We study how people react to small probability events with large negative consequences using the outbreak of the COVID-19 epidemic as a natural experiment. Our analysis is based on a unique administrative data set with anonymized monthly expenditures at the individual level. We find that older consumers reduced their spending by more than younger consumers in a way that mirrors the age dependency in COVID-19 case-fatality rates. This differential expenditure reduction is much more prominent for high-contact goods than for low-contact goods and more pronounced in periods with high COVID-19 cases. Our results are consistent with the hypothesis that people react to the risk of contracting COVID-19 in a way that is consistent with a canonical model of risk taking

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