Abstract
The paper formalizes and tests the hypothesis that greater exposure to big shocks induces stronger societal responses for adaptation and protection from future big shocks. Support for this hypothesis is found in various strands of the literature and in new empirical tests using cross-country data on deaths due to COVID-19 and deaths during World War 2. Countries with higher death rates in the war saw lower death rates during the COVID-19 pandemic. The tests are robust to a wide range of model specifications and alternative assumptions.
Highlights
It is hard to be confident in our responses to rare events for which we have little direct experience
We find support for the predictions of our theoretical model in the empirical relationship between casualties during World War 2 (WW2) and the deaths related to COVID-19
We have proposed and tested the hypothesis that past experiences of big shocks influence the success of a society in coping with future big shocks
Summary
It is hard to be confident in our responses to rare events for which we have little direct experience. With little or no direct experience of a big shock, the perceived benefits from such investments will be lower Elements of this argument find support in research on how exposure to war and other forms of violent conflict affects behavior, collective actions, perceptions of fairness, and cooperation. The direct experience of such shocks provides important information in forming expectations about the gains from investing in adaptation and protection from future shocks. In testing this theory, we focus on Europe—broadly defined to embrace the Nordic countries, Russia and Central Asia—though we test robustness to using an extended set of countries with global coverage.
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