Eichenbaum, Martin
[VerfasserIn];
Godinho de Matos, Miguel
[VerfasserIn];
Lima, Francisco
[VerfasserIn];
Rebelo, Sergio T.
[VerfasserIn];
Trabandt, Mathias
[VerfasserIn]
How Do People Respond to Small Probability Events with Large, Negative Consequences?
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments October 2020 erstellt
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