Containing the Virus or Reviving the Economy? Evidence from Individual Expectations During the COVID-19 Epidemic

How does an epidemic affect individuals’ expectations on economic prospects? Do people care more about containing the disease or sustaining normal economic activities during the epidemic? We implement an incentivized longitudinal online survey on economic expectations with randomized controlled trials during the COVID-19 epidemic in China to answer these questions. Conditioning on individual fixed effects, we find that lower number of confirmed COVID-19 cases in a city significantly increases individual’s expectation on GDP growth rate. However, individuals’ perception on the level of economic recovery is not correlated with their expectations on GDP growth. Moreover, individuals do not update their expectations when information on work resumption rate is provided in a randomized controlled trial. Our finding conveys the message to policy makers that, during an epidemic, containing the spread of the disease should be prioritized than resuming economic activities, at least from the perspective of maintaining positive economic expectations among individuals.