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Managing the endogenous risk of disease outbreaks with non-constant background risk

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  • Berry, Kevin
  • Finnoff, David
  • Horan, Richard D.
  • Shogren, Jason F.

Abstract

There is a growing concern that risks of disease outbreak and pandemics are increasing over time. We consider optimal investments in prevention before an outbreak using an endogenous risk approach within an optimal control setting. Using the threat of pandemic influenza as an illustrative example, we demonstrate that prevention expenditures are relatively small in comparison to the potential losses facing the USA, and these expenditures need to be flexible and responsive to changes in background risk. Failure to adjust these expenditures to changes in background risk poses a significant threat to social welfare into the future.

Suggested Citation

  • Berry, Kevin & Finnoff, David & Horan, Richard D. & Shogren, Jason F., 2015. "Managing the endogenous risk of disease outbreaks with non-constant background risk," Journal of Economic Dynamics and Control, Elsevier, vol. 51(C), pages 166-179.
  • Handle: RePEc:eee:dyncon:v:51:y:2015:i:c:p:166-179
    DOI: 10.1016/j.jedc.2014.09.014
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    References listed on IDEAS

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    Cited by:

    1. repec:kap:enreec:v:70:y:2018:i:3:d:10.1007_s10640-017-0160-5 is not listed on IDEAS
    2. repec:kap:enreec:v:70:y:2018:i:3:d:10.1007_s10640-018-0227-y is not listed on IDEAS
    3. Berry, Kevin & Finnoff, David, 2016. "Choosing between adaptation and prevention with an increasing probability of a pandemic," Journal of Economic Behavior & Organization, Elsevier, vol. 132(PB), pages 177-192.
    4. Charles Sims & Betsy Heines & Suzanne Lenhart, 2017. "Assessing the Economic Tradeoffs Between Prevention and Suppression of Forest Fires," Working Papers 2017-05, University of Tennessee, Department of Economics.

    More about this item

    Keywords

    Endogenous risk; Prevention schedule; Optimal control; Infectious disease;

    JEL classification:

    • Q29 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Other
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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