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Infectious Diseases and Economic Growth

  • Aditya Goenka
  • Lin Liu
  • Manh-Hung Nguyen

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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File URL: http://www2.toulouse.inra.fr/lerna/travaux/cahiers2011/11.04.338.pdf
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Paper provided by LERNA, University of Toulouse in its series LERNA Working Papers with number 11.04.338.

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Date of creation: Feb 2011
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Handle: RePEc:ler:wpaper:11.04.338
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  1. Mark Gersovitz & Jeffrey S. Hammer, 2004. "The Economical Control of Infectious Diseases," Economic Journal, Royal Economic Society, vol. 114(492), pages 1-27, 01.
  2. Cuong Le Van & Yiannis Vailakis, 2003. "Existence of a competitive equilibrium in a one sector growth model with heterogeneous agents and irreversible investment," Economic Theory, Springer, vol. 22(4), pages 743-771, November.
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  4. Chichilnisky, Graciela, 1981. "Existence and Characterization of Optimal Growth Paths Including Models with Non-Convexities in Utilities and Technologies," Review of Economic Studies, Wiley Blackwell, vol. 48(1), pages 51-61, January.
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  6. Quamrul H. Ashraf & Ashley Lester & David N. Weil, 2008. "When Does Improving Health Raise GDP?," NBER Working Papers 14449, National Bureau of Economic Research, Inc.
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  8. David N. Weil, 2005. "Accounting for the Effect of Health on Economic Growth," NBER Working Papers 11455, National Bureau of Economic Research, Inc.
  9. David E. Bloom & David Canning & Günther Fink, 2009. "Disease and Development Revisited," NBER Working Papers 15137, National Bureau of Economic Research, Inc.
  10. Hoyt Bleakley, 2007. "Disease and Development: Evidence from Hookworm Eradication in the American South," The Quarterly Journal of Economics, MIT Press, vol. 122(1), pages 73-117, 02.
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  16. Aditya Goenka & Lin Liu & Manh-Hung Nguyen, 2011. "Infectious Diseases and Economic Growth," LERNA Working Papers 11.04.338, LERNA, University of Toulouse.
  17. Daron Acemoglu & Simon Johnson, 2006. "Disease and Development: The Effect of Life Expectancy on Economic Growth," NBER Working Papers 12269, National Bureau of Economic Research, Inc.
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  19. repec:hal:journl:halshs-00177269 is not listed on IDEAS
  20. Robert E. Hall & Charles I. Jones, 2004. "The Value of Life and the Rise in Health Spending," NBER Working Papers 10737, National Bureau of Economic Research, Inc.
  21. Kremer, Michael, 1996. "Integrating Behavioral Choice into Epidemiological Models of AIDS," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 549-73, May.
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  26. Alwyn Young, 2005. "The Gift of the Dying: The Tragedy of Aids and the Welfare of Future African Generations," The Quarterly Journal of Economics, MIT Press, vol. 120(2), pages 423-466, May.
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