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Infectious diseases and economic growth

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  • Goenka, Aditya
  • Liu, Lin
  • Nguyen, Manh-Hung

Abstract

This paper develops a framework to study the economic impact of infectious diseases by integrating epidemiological dynamics into a neo-classical growth model. There is a two way interaction between the economy and the disease: the incidence of the disease affects labor supply, and investment in health capital can affect the incidence and recuperation from the disease. Thus, both the disease incidence and the income levels are endogenous. The disease dynamics make the control problem non-convex thus usual optimal control results do not apply. We establish existence of an optimal solution, continuity of state variables, show directly that the Hamiltonian inequality holds thus establishing optimality of interior paths that satisfy necessary conditions, and of the steady states. There are multiple steady states and the local dynamics of the model are fully characterized. A disease-free steady state always exists, but it could be unstable. A disease-endemic steady state may exist, in which the optimal health expenditure can be positive or zero depending on the parameters of the model. The interaction of the disease and economic variables is non-linear and can be non-monotonic.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 50 (2014)
Issue (Month): C ()
Pages: 34-53

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Handle: RePEc:eee:mateco:v:50:y:2014:i:c:p:34-53

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Web page: http://www.elsevier.com/locate/jmateco

Related research

Keywords: Epidemiology; Infectious diseases; Existence of equilibrium; Sufficiency in non-convex dynamic problems; Health expenditure; Economic growth;

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Citations

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Cited by:
  1. Aditya Goenkay & Lin Liu & Manh-Hung Nguyen, 2013. "Infectious Diseases and Economic Growth," Working Papers, Development and Policies Research Center (DEPOCEN), Vietnam 06, Development and Policies Research Center (DEPOCEN), Vietnam.
  2. Aditya Goenka & Lin Liu, 2012. "Infectious diseases and endogenous fluctuations," Economic Theory, Springer, Springer, vol. 50(1), pages 125-149, May.
  3. Chakraborty, Shankha & Papageorgiou, Chris & Perez Sebastian, Fidel, 2013. "Health Cycles and Health Transitions," MPRA Paper 50588, University Library of Munich, Germany.

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