TY  - BOOK
AU  - Eichenbaum,Martin S.
AU  - de Matos,Miguel Godinho
AU  - Lima,Francisco
AU  - Rebelo,Sergio
AU  - Trabandt,Mathias
ED  - National Bureau of Economic Research.
TI  - How do People Respond to Small Probability Events with Large, Negative Consequences?
T2  - NBER working paper series
PY  - 2020///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
N1  - October 2020; Hardcopy version available to institutional subscribers
N2  - 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
UR  - https://www.nber.org/papers/w27988
UR  - http://dx.doi.org/10.3386/w27988
ER  -