Covid-19 endogenous policy response: evidence from affected countries

The Covid-19 pandemic triggered severely different policies response across countries and waved the discrepancy in the exposure that each country has in respect to the health crisis. This work offers a first quantitative framework for further investigations on how and whether the mitigation policy mix deployed by the different authorities reflects structural differences in the socio-economic background of developing countries. Starting from an extended version of the SIR theoretical model, I formulate a dynamic optimization problem for the governments to control the spread of the coronavirus. The quantitative analysis identifies the features that outline both the progression of the disease as well as the (disease) mitigation response commitment of each country. Whilst the differences in the intensity of the Covid-19 policy response is only partially driven from differences in the gradient of the transmission rate, I find that the socio-economic characteristics of each country have a deeper influence on the government’s response commitment. Once national authorities and international institutions are able to “endogenize” the pandemic dynamics in their recursive policy planning, the trade-off between health benefits and economic costs will be lower and the agents’ cooperation higher (in adherence with the deployed mitigation regime).