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Diseases and Development

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  • Shankha Chakraborty
  • Chris Papageorgiou
  • Fidel Pérez Sebastián

Abstract

This paper examines two related questions: what effects do infectious diseases exert on growth and development, and are they quantitatively important? We present evidence on the effect of health and infectious diseases on economic development using Hansen’s (2000) endogenous threshold methodology. Taking into account various proxies for infectious diseases as potential threshold variables we show that countries are clustered in regimes that obey different growth paths and thus provide direct evidence of threshold effects. Motivated by this evidence we propose an epidemiological overlapping generations model where the transmission and incidence of an infectious disease depend upon economic incentives and rational behavior. The economic cost of the disease comes from its effect on mortality (infected individuals can die prematurely) and morbidity (lower productivity and/or lower flow of utility from a given consumption bundle). Our main theoretical finding is that if infectious diseases are particularly virulent or debilitating, growth- or development-traps are possible. Numerical results from a calibrated version of the model show that threshold effects of diseases are quantitatively important and in particular, significant health interventions are required to propel disease-afflicted countries to a high-growth trajectory.

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Bibliographic Info

Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c011_044.

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Length: 38 pages
Date of creation: Jun 2006
Date of revision:
Handle: RePEc:deg:conpap:c011_044

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References

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  1. Geoffard, Pierre-Yves & Philipson, Tomas, 1996. "Rational Epidemics and Their Public Control," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(3), pages 603-24, August.
  2. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  3. Caner, Mehmet & Hansen, Bruce E., 2004. "Instrumental Variable Estimation Of A Threshold Model," Econometric Theory, Cambridge University Press, vol. 20(05), pages 813-843, October.
  4. Viscusi, W Kip & Evans, William N, 1990. "Utility Functions That Depend on Health Status: Estimates and Economic Implications," American Economic Review, American Economic Association, vol. 80(3), pages 353-74, June.
  5. repec:att:wimass:9419 is not listed on IDEAS
  6. Durlauf, Steven N & Johnson, Paul A, 1995. "Multiple Regimes and Cross-Country Growth Behaviour," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(4), pages 365-84, Oct.-Dec..
  7. S Durlauf & Danny Quah, 1998. "The New Empirics of Economic Growth," CEP Discussion Papers dp0384, Centre for Economic Performance, LSE.
  8. Javier Birchenall, 2007. "Escaping high mortality," Journal of Economic Growth, Springer, vol. 12(4), pages 351-387, December.
  9. Costas AZARIADIS & David DE LA CROIX, 2002. "Growth or equality ? Losers and gainers from financial reform," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2002036, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  10. Hansen, Bruce E, 1996. "Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis," Econometrica, Econometric Society, vol. 64(2), pages 413-30, March.
  11. Bruce E. Hansen, 1996. "Sample Splitting and Threshold Estimation," Boston College Working Papers in Economics 319., Boston College Department of Economics, revised 12 May 1998.
  12. Desmond McCarthy & Holger Wolf & Yi Wu, 2000. "The Growth Costs of Malaria," NBER Working Papers 7541, National Bureau of Economic Research, Inc.
  13. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-63, July.
  14. Liu, Zhenjuan & Stengos, Thanasis, 1999. "Non-linearities in Cross-Country Growth Regressions: A Semiparametric Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(5), pages 527-38, Sept.-Oct.
  15. Durlauf,S.N. & Kourtellos,A. & Minkin,A., 2000. "The local Solow growth model," Working papers 21, Wisconsin Madison - Social Systems.
  16. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May.
  17. John Luke Gallup & Jeffrey D. Sachs, 2000. "The Economic Burden of Malaria," CID Working Papers 52, Center for International Development at Harvard University.
  18. Daron Acemoglu & Simon Johnson & James Robinson, 2003. "Disease and Development in Historical Perspective," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 397-405, 04/05.
  19. Bloom, David E & Canning, David & Sevilla, Jaypee, 2003. " Geography and Poverty Traps," Journal of Economic Growth, Springer, vol. 8(4), pages 355-78, December.
  20. Winford H. Masanjala & Chris Papageorgiou, 2004. "The Solow model with CES technology: nonlinearities and parameter heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(2), pages 171-201.
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Citations

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Cited by:
  1. Peter Lorentzen & John McMillan & Romain Wacziarg, 2005. "Death and Development," NBER Working Papers 11620, National Bureau of Economic Research, Inc.
  2. Douglas Gollin & Christian Zimmermann, 2008. "Malaria: Disease Impacts and Long-Run Income Differences," Department of Economics Working Papers 2008-17, Department of Economics, Williams College.
  3. Bhattacharyya, Sambit, 2009. "Institutions, diseases, and economic progress: a unified framework," Journal of Institutional Economics, Cambridge University Press, vol. 5(01), pages 65-87, April.
  4. Francesco Ricci & Marios Zachariadis, 2006. "Determinants of Public Health Outcomes: A Macroeconomic Perspective," Computing in Economics and Finance 2006 107, Society for Computational Economics.
  5. Hasan, Lubna, 2009. "Disease, Institutions and Underdevelopment," MPRA Paper 16862, University Library of Munich, Germany.
  6. Casabonne, Ursula & Kenny, Charles, 2012. "The Best Things in Life are (Nearly) Free: Technology, Knowledge, and Global Health," World Development, Elsevier, vol. 40(1), pages 21-35.
  7. Xue Qiao, 2012. "Unsafe sex, AIDS and development," Journal of Economics, Springer, vol. 105(3), pages 263-279, April.
  8. Alan Martina, 2007. "A Class of Poverty Traps: A Theory and Empirical Tests," ANU Working Papers in Economics and Econometrics 2007-482, Australian National University, College of Business and Economics, School of Economics.
  9. Tamara Fioroni, 2010. "Child mortality and fertility: public vs private education," Journal of Population Economics, Springer, vol. 23(1), pages 73-97, January.

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