Intervention Uncertainty, Household Health, and Pandemic

60 Pages Posted: 19 Jan 2022

See all articles by Rui Sun

Rui Sun

London School of Economics & Political Science (LSE) - Department of Economics

Yikai Zhao

affiliation not provided to SSRN

Abstract

This paper builds a government policy choice model in a general equilibrium setting in which households' health status responds to a stricter policy on the pandemic. By assuming an exogenous policy decision date, the model implies the government should maintain the current policy until the perceived effects of the current policy on infection are too low. The threshold is determined by policy uncertainty and risk-aversion, which further control the announcement effects of the new policy. Higher policy uncertainty will diminish the positive impact of the stricter policy on households' health status. Also, households' risk-aversion reduces the jump in households' health status once the implementation of the new policy is announced. These qualitative results still hold when the government can choose the policy change date.

Keywords: Household Health, Policy Uncertainty, Bayesian Learning, Government Policy, Pandemic

Suggested Citation

Sun, Rui and Zhao, Yikai, Intervention Uncertainty, Household Health, and Pandemic. Available at SSRN: https://ssrn.com/abstract=4012800 or http://dx.doi.org/10.2139/ssrn.4012800

Rui Sun (Contact Author)

London School of Economics & Political Science (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom
7438347752 (Phone)
WC2A 2AE (Fax)

Yikai Zhao

affiliation not provided to SSRN ( email )

No Address Available

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