Trust, social protection, and compliance: Moral hazard in Latin America during the COVID-19 pandemic

Evidence suggests that political trust is an important predictor of compliance with government policies intended to enhance collective welfare, especially in emergency situations. During the COVID-19 pandemic, for example, multiple studies related political trust to increased compliance with shelter-in-place orders. Yet, these findings come mostly from high-income countries where political trust and wealth correlate positively, thus hindering causal inference. In Latin America, both variables correlate negatively, allowing for better comparison of competing explanations. Using a difference-in-differences design, we find that in Latin America wealth and, counterintuitively, low political trust predict increased compliance. To understand mechanisms, we decompose political trust and wealth into underlying predictors (education, social protection, and corruption) and reinsert them into the model. While education, as a wealth proxy, predicts decreased mobility across all periods, social protection, which is the strongest predictor of political trust, relates significantly to increased mobility, but only in the first two weeks after lockdown prior to distribution of emergency support. This suggests the existence of a public health moral hazard early in the pandemic, whereby citizens who benefited previously from government benefits may have been more risk tolerant in the face of the COVID-19 threat. We interpret these findings within the context of the region’s recent 'inclusionary turn.' Future studies should explore more the distinct relationship between political trust, risk perception, and compliance in low- and middle- compared to high-income countries.