Combating the COVID-19 pandemic: The role of disaster experience

Abstract

In this study, we provide evidence suggesting that in countries with severe disaster experience (SDE), the response to the coronavirus disease 2019 (COVID-19) pandemic is characterized by a higher level of attention in the population, more timely market responses, and stricter government containment measures. Specifically, we find that during the first COVID-19 outbreak in Wuhan, China, people in countries with SDE searched for related information more frequently on Google than did people in countries with mild disaster experience (MDE). Moreover, we find that a higher level of attention to COVID-19, as measured by Google search index usage, led to greater declines in stock market indexes in countries with SDE than in those with MDE. Finally, we find that compared with countries with MDE, those with SDE implemented more stringent social distancing policies in response to domestic COVID-19 outbreaks, and individuals in the latter group of countries were more likely to follow government-imposed rules of social distancing in both the early outbreak and reopening phases. Our findings suggest that disaster experience increases risk aversion and is an essential mechanism by which individuals, markets, and countries respond to COVID-19 in a timely manner.