State Responses to COVID-19, State Reputations and Long-Term Economic Health

By Profs. Christopher Witko and Michael Nelson

The most important thing governments could do to get the economy back up and running is to contain COVID-19. But, in the absence of any national strategy to contain COVID-19, the tradeoff between short-term public health and economic health has become increasingly salient in the United States. Due to U.S. federalism and federal inaction, state governments are at the front lines of navigating this tradeoff.

Equipped with special emergency grants of authority, many state governors are making these decisions; there is considerable variation in the choices they are making. For instance, while governors like Mike DeWine of Ohio and Gavin Newsom of California “shut down” their states relatively early, other governors acted much later or never issued stay-at-home orders.

Now, as some states have passed the first major wave of COVID-19 cases, governors are also varying in the speed at which they have allowed their state economies to open back up.

While governors are clearly considering the short-term economic implications of public health decisions, we argue in a recent article in the Journal of Behavioral Public Administration that there may also be long-term economic implications resulting from the reputations that states are developing as they respond to the pandemic.

Because these pandemic public health decisions, made by visible public officials in the midst of a highly-salient crisis, are highly observable by the public, we think it is possible that individuals develop beliefs about state governments’ quality and values based on states’ responses to COVID-19. And, by extension, individuals will act on these beliefs, helping them to decide whether or not to pursue economic opportunities in different states when they have such choices.

Previous research shows that individuals have stereotypes about different states and that people seem to move to areas that are more consistent with their political values. The public health consensus settled on mandatory social distancing as a way to slow the spread of COVID-19 in March of 2020.

States’ decisions with respect to this consensus shape the opinions or “reputations” of different states in the eyes of the public — as being more or less concerned about economic performance, more or less likely to follow scientific advice and so forth, and these reputations may make certain states more or less attractive as a place to live in and contribute to the economy for people observing these decisions.

We tested this possibility by using a conjoint experiment administered in April 2020, where we presented our approximately 1,000 research subjects with a large number of hypothetical job offers that varied on attributes like, salary, location, company culture, company size, how pro-Trump or pro-Clinton the state was in 2016, and also how the state governor is responding to the COVID-19 crisis, randomizing one of four possibilities: the governor (1) issued a proclamation thanking healthcare workers, (2) devolved authority for public health choices to local governments, (3) recommended limiting gatherings to less than 10 people or (4) issued mandatory “stay-at-home” orders.

In the figure above we can see that, not surprisingly, salary has by far the largest effect on whether an individual would be willing to take a hypothetical job. But, after salary, the state governor’s response to COVID-19 was the largest factor for potential employees. The more stringent a governor’s action was, the more likely an individual is to accept a hypothetical job.

For instance, compared to just issuing a proclamation in honor of healthcare workers, subjects were about 7 percent more likely to accept a hypothetical job in a state in which a governor issued stay-at-home order.

For the roughly 15% of respondents who are not concerned about COVID-19, we do not see any similar effect for the governor’s response. There are also some differences rooted in respondents’ partisanship. For Republicans the effects are smaller than for Democrats. But Republicans are still about 3% more likely to accept a job in a state where the governor issued a stay-at-home order compared to only issuing a proclamation.

The takeaway here is not that Americans love stay-at-home orders and want to live in a state that has them. Rather, we think that people value adherence to the medical and public health consensus, when such a consensus exists, as it clearly did in March and April of 2020.

People view adherence to that consensus as a sign of good governance and the right values, making a state a more attractive place to live and work. Of course, as the public health consensus shifts, or there is not a consensus, then the conclusions that people draw about states for enforcing or not enforcing social distancing would presumably change.

It is strange to have consensus on anything in this highly polarized era, but because some of the governors who first mandated social distancing were Republicans (DeWine of Ohio and Larry Hogan of Maryland) polarization was partly short-circuited. There is no guarantee that this situation will persist, however.

At this time very few people will be weighing competing job offers, of course. How persistent these impressions about different states are remains to be seen. But other research shows that expressions of preferences in experiments like the one we did mirror actual real-world behavior to some extent.

This has potentially important implications for state economic development because in the U.S. the states vigorously compete for residents, particularly younger, highly educated and upper income residents, who are also more mobile. This means that states that do not follow the public health consensus are taking a risk that has potentially important long-term economic consequences.

If states act in a way that is viewed as recklessly disregarding public health advice many people will either potentially be less likely to move to such states, or companies in them will have to pay higher wages to attract the same level of talent. State government officials should consider this consequence as they weigh the economic implications of public health responses to COVID-19.