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Diseases and Development

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  • Chris Papageorgiou

    ()

  • Shankha Chakraborty

    ()

  • Fidel Perez-Sebastian

    ()

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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Paper provided by Department of Economics, Louisiana State University in its series Departmental Working Papers with number 2005-12.

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Handle: RePEc:lsu:lsuwpp:2005-12

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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. 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.
  3. Douglas Gollin & Christian Zimmermann, 2007. "Malaria: Disease Impacts and Long-Run Income Differences," Working papers 2007-30, University of Connecticut, Department of Economics, revised Apr 2010.
  4. Xue Qiao, 2012. "Unsafe sex, AIDS and development," Journal of Economics, Springer, vol. 105(3), pages 263-279, April.
  5. Hasan, Lubna, 2009. "Disease, Institutions and Underdevelopment," MPRA Paper 16862, University Library of Munich, Germany.
  6. Francesco Ricci & Marios Zachariadis, 2006. "Determinants of Public Health Outcomes: A Macroeconomic Perspective," DEGIT Conference Papers c011_045, DEGIT, Dynamics, Economic Growth, and International Trade.
  7. 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.
  8. Tamara Fioroni, 2010. "Child mortality and fertility: public vs private education," Journal of Population Economics, Springer, vol. 23(1), pages 73-97, January.
  9. Sambit Bhattacharyya, 2008. "Institutions, Diseases and Economic Progress: A Unified Framework," Departmental Working Papers 2008-15, The Australian National University, Arndt-Corden Department of Economics.

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