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DISEASES AND DEVELOPMENT: A Theory of Infection Dynamics and Economic Behavior

Author

Listed:
  • Fidel Perez-Sebastian

    (University of Alicante)

  • Chris Papageorgiou

    (IMF Research)

  • Shankha Chakraborty

    (University of Oregon)

Abstract

We propose an economic theory of infectious disease transmission and rational behavior. Diseases are costly due to mortality (infected individuals can die prematurely) and morbidity (lower productivity and quality of life). Our model offers three main insights. First, a greater prevalence of diseases implies a lower savings-investment propensity because of mortality and morbidity. The extent to which preventive health investment can counter this depends on the prevalence rate and, specifically, on the strength of the disease externality. Second, infectious diseases can generate low-growth traps in which income alone can not push the economy out of underdevelopment. This is distinctly different from the development traps found by previous literature. Third, income per se does not cause health when prevalence is high. Successful interventions should therefore be health specific and when possible channeled via the public health delivery system.

Suggested Citation

  • Fidel Perez-Sebastian & Chris Papageorgiou & Shankha Chakraborty, 2008. "DISEASES AND DEVELOPMENT: A Theory of Infection Dynamics and Economic Behavior," 2008 Meeting Papers 777, Society for Economic Dynamics.
  • Handle: RePEc:red:sed008:777
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    References listed on IDEAS

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