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Medium term dynamics and inequalities under epidemics

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  • Raouf Boucekkine

    (CORE and Economics department, UCL, Louvain)

  • Raouf Boucekkine

    ()
    (PSE and CEPREMAP, Paris)

Abstract

We are concerned by the dynamic demographic and economic consequences of epidemics, and to this end, we consider a general overlapping generations model which allows for several epidemic configurations. People live for three periods, successively as children, junior adults and senior adults. A junior adult has an exogenous number of children and is perfectly altruistic in that is he only cares for the survival of his children and the social position they will get. He invests in his own health and education, and in the health and education of his children. Because we take into account both child and adult mortality, we are in principle able to investigate the implications of epidemics for any age-mortality profile. First, we fully analytically characterise the short run and long run economic and demographic properties of the model, which allows us to do the same for the distributions of human capital and thus income. Second, we analyse the consequences of one-period long epidemics in two polar cases: an epidemic hitting only children Vs an epidemic only killing adults. Both are shown to have permanent demographic and economic effects. In contrast to epidemics only killing children, ‘adult’ epidemics are additionally shown to distort the income distribution in the medium run, creating more poverty. Such distributional effects vanish in the long run. To analyse the medium term effects of HIV/AIDS, we assume that the epidemic hit junior adults, increase the number of deaths among children and reduces fertility. Then, we show that the size of the total population will decrease in the medium term, and that the share of the active population in the total population will also lower. In the active population, the proportion of people with a high level of human capital will decrease and the proportion holding a low level of human capital will increase. Finally output per worker and per capita will decrease.

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Bibliographic Info

Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2006 with number 209.

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Date of creation: 04 Jul 2006
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Handle: RePEc:sce:scecfa:209

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Keywords: Epidemic; hysteresis; echo effect; overlapping generation model;

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References

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  1. Raouf Boucekkine & David de la Croix & Omar Licandro, . "vintage human capital, demographic trends and endogenous growth," Working Papers 2000-02, FEDEA.
  2. Shankha Chakraborty & Mausumi Das, 2004. "Mortality, Human Capital and Persistent Inequality," Econometric Society 2004 North American Summer Meetings 100, Econometric Society.
  3. Ferreira, Pedro Cavalcanti Gomes & Pessoa, Samuel de Abreu, 2003. "The Long Run Economic Impact of AIDS," Economics Working Papers (Ensaios Economicos da EPGE) 475, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  4. Raouf, BOUCEKKINE & Bity, DIENE & Theophile, AZOMAHOU, 2006. "The Growth economics of epidemics," Discussion Papers (ECON - Département des Sciences Economiques) 2006021, Université catholique de Louvain, Département des Sciences Economiques.
  5. McDonald, Scott & Roberts, Jennifer, 2006. "AIDS and economic growth: A human capital approach," Journal of Development Economics, Elsevier, vol. 80(1), pages 228-250, June.
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  7. Samuel Bowles & Herbert Gintis, 2002. "The Inheritance of Inequality," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 3-30, Summer.
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  12. Clive Bell & Shantayanan Devarajan & Hans Gersbach, 2003. "The long-run economic costs of AIDS : theory and an application to South Africa," Policy Research Working Paper Series 3152, The World Bank.
  13. De Walque, Damien, 2004. "How does the impact of an HIV/AIDS information campaign vary with educational attainment ? Evidence from rural Uganda," Policy Research Working Paper Series 3289, The World Bank.
  14. Denis Cogneau & Michael Grimm, 2008. "The Impact of AIDS Mortality on the Distribution of Income in C�te d'Ivoire," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 17(5), pages 688-728, November.
  15. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  16. Corrigan, Paul & Glomm, Gerhard & Mendez, Fabio, 2005. "AIDS crisis and growth," Journal of Development Economics, Elsevier, vol. 77(1), pages 107-124, June.
  17. Hirshleifer, Jack, 1987. "Economic Behaviour in Adversity," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226342825, June.
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Cited by:
  1. Raouf Boucekkine & Rodolphe Desbordes & Hélène Latzer, 2009. "How do epidemics induce behavioral changes?," Journal of Economic Growth, Springer, vol. 14(3), pages 233-264, September.

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