Institutional development and the government response to COVID-19 in China

As COVID-19 is pervasive across the globe, governments in different countries face the dilemma of restricting the transmission risk of the virus by social distancing while yet maintaining economic activity. Inadequate social distancing policies lead to more infection cases and deaths, while over stringent social distancing policies have significant economic cost implications. This study investigates the role of local government institutions in striking the balance between saving lives and economic recovery. We based our study on a sample of 28 provincial governments in China during the early outbreak of 2020 when the emergency responses of local governments were synchronous. The findings show that local governments in those provinces with lower degrees of marketization, which were accustomed to directly intervene in the social system, mandatorily quarantined many more close contacts for each confirmed case than those in the more market-oriented provinces whose social distancing policies took economic considerations into account. The 'overdone' (over stringent) social distancing policies in the more state-oriented provinces led to lower human mobility and economic growth. This study highlights the importance of taking economic considerations into account when adopting policies and strategies to combat the spread of COVID-19 and how different institution management cultures lead to different outcomes.