Subsidy Design for Personal Protective Equipments (PPEs) Adoption

Since December 2019, the COVID-19 outbreak has spread in over 100 countries and regions at a stunning pace. To prevent humanitarian health hazards such as COVID-19, people are strongly suggested to purchase and use Personal Protective Equipments (PPEs) for self-protection. However, the fraction of the population who refused to comply with the PPEs is high (and also much higher in some regions than others). In this paper, we focus on an empirically tested behavioral explanation for the compliance obstacle (a lack of self-control) based on the present-bias effect, which means the trend to give a higher valuation to a present reward but a lower valuation to a future reward (O’Donoghue & Rabin, 2006). Since the utility of PPEs is realized in the future, a consumer may postpone his purchase decision but finally abandon his purchase plan in the future period due to this present-bias effect. The key take-away we focus on is that advance selling can be beneficial to the consumers as a commitment device (Bryan et al., 2010). However, the effect of advance selling may be limited, especially for consumers with low valuation, and can only encourage a part of consumers to purchase PPEs. Advance selling alone cannot fully address the compliance obstacles in PPEs. © 2022, The Author(s), under exclusive license to Springer Nature Switzerland AG.

The COVID-19 Pandemic in a Monetary Schumpeterian Model

In this paper, following Blanchard and Fischer (1989), I investigate how the presence of the COVID-19 pandemic-the increase in the probability of death-may affect growth and welfare in a scale-invariant R&D-based Schumpeterian model. Without money, the increase in the probability of death has no effect on long-run growth and a negative effect on welfare. By contrast, when money is introduced via the cash-in-advance (CIA) constraint on consumption, the increase in the probability of death decreases long-run growth and welfare under elastic labor supply. Calibration shows that the quantitative effect of an increase in the probability of death on welfare is much larger compared to that on growth.