Decision-Making in the Dark: The Asymmetric Spread of COVID-19 Policies

We investigate the diffusion of Non-Pharmaceutical Interventions across OECD countries from January 2020 to March 2022 using spatial econometric methods on daily data about policy stringency and epidemic evolution. During the COVID-19 pandemic, policymakers needed to make crucial decisions in a low-information environment: in such a context, the incentives to mimic the behavior of others can be quite strong. We empirically document a systematic link between a country’s stringency index and the measures adopted by its neighbors in the preceding days. Policy diffusion, however, is asymmetric: there is a robust diffusion when neighbors escalate stringency, whereas there are no discernible diffusion effects when measures are relaxed. These dynamics are more pronounced in countries with lower institutional quality. Due to this asymmetry, the repeal of some policies might have been suboptimally delayed.