Expectations, Infections, and Economic Activity

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

doi:10.1086/729449

Journal of Political Economy Vol. 132 No. 8 2024

Expectations, Infections, and Economic Activity

Martin Eichenbaum^1,2; Miguel Godinho de Matos; Francisco Lima^3,4; Sergio Rebelo^1,2; Mathias Trabandt^5,6

¹ Northwestern University · ² Northwestern University · ³ Instituto de Engenharia de Sistemas e Computadores Investigação e Desenvolvimento · ⁴ Instituto Superior de Gestão · ⁵ Goethe University Frankfurt · ⁶ Halle Institute for Economic Research

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.

DOI: 10.1086/729449
Volume: 132
Issue: 8
Pages: 2571-2611
Language: en
Sources: bibtex:phds-export.bib openalex crossref

Expectations, Infections, and Economic Activity

Abstract

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