Risk perception and media in shaping protective behaviors: insights from the early phase of COVID-19 Italian outbreak

In the absence of target treatments or vaccination, the SARS-CoV-2 pandemic can be impeded by effectively implementing containment measures and behaviors. This relies on individuals’ adoption of protective behaviors, their perceived risk, and the use and trust of information sources. During a health emergency, receiving timely and accurate information enables individuals to take appropriate actions to protect themselves, shaping their risk perception. Italy was the first western country plagued by COVID-19 and one of the most affected in the early phase. During this period, we surveyed 2,223 Italians before the national lockdown. A quarter of the sample perceived COVID-19 less threatening than flu and would not vaccinate, if a vaccine was available. Besides, most people perceived containment measures, based on social distancing or wearing masks, not useful. This perceived utility was related to COVID-19 threat perception and efficacy beliefs. All these measures were associated with the use of media and their truthfulness: participants declared to mainly use the Internet, while health organizations’ websites were the most trusted. Although social networks were frequently used, they were rated lower for trustfulness. Our data differ from those obtained in other community samples, suggesting the relevance to explore changes across different countries and during the different phases of the pandemic. Understanding these phenomena, and how people access the media, may contribute to improve the efficacy of containment measures, tailoring specific policies and health communications

Incomplete financial markets and jumps in asset prices

For incomplete financial markets, jumps in both prices and consumption can be unavoidable. We consider pure-exchange economies with infinite horizon, discrete time, uncertainty with a continuum of possible shocks at every date. The evolution of shocks follows a Markov process, and fundamentals depend continuously on shocks. It is shown that: (1) equilibria exist; (2) for effectively complete financial markets, asset prices depend continuously on shocks; and (3) for incomplete financial markets, there is an open set of economies U such that for every equilibrium of every economy in U, asset prices at every date depend discontinuously on the shock at that date

The dynamics of innovations and citations

We present a model in which patent citations occur as new ideas are produced from combinations of existing ideas. An idea’s usability in this process is represented as an interval in a variety space of ideas, whose length determines the likelihood of citation. This process endogenously derives exponential aging of patents, which is consistent with empirical observations. The endogeneity of aging sets our process apart from the standard preferential attachment literature

Risk Aversion in a Model of Endogenous Growth

Despite the evidence on incomplete financial markets and substantial risk being borne by innovators, current models of growth through creative destruction predominantly model innovators’ as risk neutral. Risk aversion is expected to reduce the incentive to innovate and we might fear that without insurance innovation completely disappears in the long run. The present paper introduces risk averse agents into an occupational choice model of endogenous growth in which insurance against failure to innovate is not available. We derive a clear negative relationship between the level of risk aversion and long run growth. Surprisingly, we show that in an equilibrium there exists a cut-off value of risk aversion below which the growth rate of the mass of innovators tends to a strictly positive constant. In this case, innovation persists on the long run and consumption per capita grows at a strictly positive rate. On the other hand, for levels of risk aversion above the cut-off value, the economy eventually stagnates

Status Consumption in Networks: A Reference Dependent Approach

We introduce loss aversion into a model of conspicuous consumption in networks. Agents allocate heterogeneous incomes between a conventional good and a status good. They interact over a connected network and compare their status consumption to their neighbors’ average consumption. We find that aversion to lying below the social reference point has a profound impact. If loss aversion is large relative to income heterogeneity, a continuum of conformist Nash equilibria emerges. Agents have the same status consumption, despite differences in incomes and network positions, and the equilibrium is indeterminate. Otherwise, there is a unique Nash equilibrium and status consumption depends on the interplay between network positions and incomes. Our analysis extends to homothetic and heterogeneous preferences

Risk Aversion in a Model of Endogenous Growth

Despite the evidence on incomplete financial markets and substantial risk being borne by innovators, current models of growth through creative destruction predominantly model innovators’ as risk neutral. Risk aversion is expected to reduce the incentive to innovate and we might fear that without insurance innovation completely disappears in the long run. The present paper introduces risk averse agents into an occupational choice model of endogenous growth in which insurance against failure to innovate is not available. We derive a clear negative relationship between the level of risk aversion and long run growth. Surprisingly, we show that in an equilibrium there exists a cut-off value of risk aversion below which the growth rate of the mass of innovators tends to a strictly positive constant. In this case, innovation persists on the long run and consumption per capita grows at a strictly positive rate. On the other hand, for levels of risk aversion above the cut-off value, the economy eventually stagnates

Status Substitution and Conspicuous Consumption

This paper adapts ideas from social identity theory to set out a new framework for modelling conspicuous consumption. Notably, this approach can explain two stylised facts about conspicuous consumption that initially seem at odds with one another, and to date have required different families of models to explain each: (1) people consume more visible goods when their neighbours’ incomes rise, but (2) consume less visible goods when incomes of those with the same race in a wider geographic area rise. The first fact is typically explained by ‘Keeping up with the Joneses’ models, and the second by signalling models. Our model also explains related features of conspicuous consumption: that the rich are more sensitive to others’ incomes than the poor, and that the effect of income inequality on consumption differs qualitatively across groups. Importantly, it explains this fourth stylised fact without falling back on differences in preferences across groups, as required in other models. In addition, our model delivers new testable predictions regarding the role of network structure and income inequality for conspicuous consumption

Poverty Traps, Indeterminacy, and the Wealth Distribution

We consider a one-sector growth model in continuous time with a production externality and endogenous labor supply. There is a continuum of households who have identical preferences but differ with respect to their initial wealth. We show that there exist economies such that an indeterminate steady state exists for some wealth distribution but not for others. A second result is that a redistribution of wealth may drive the economy from a steady state with strictly positive output to a poverty trap in which output converges asymptotically to zero. These results indicate that differences in the wealth distribution may be responsible for drastic differences in the long-run standard of living