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Diversity or Focus? Spending to Combat Infectious Diseases When Budgets Are Tight

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  • Anderson, Soren
  • Laxminarayan, Ramanan

    () (Resources for the Future)

  • Salant, Stephen W.

Abstract

We consider a health authority seeking to allocate annual budgets optimally over time to minimize the discounted social cost of infection(s) evolving in a finite set of "R greater than or equal to 2" groups. This optimization problem is challenging, since as is well known, the standard epidemiological model describing the spread of disease (SIS) contains a nonconvexity. Standard continuous-time optimal control is of little help, since a phase diagram is needed to address the nonconvexity and this diagram is 2R dimensional (a costate and state variable for each of the R groups). Standard discrete-time dynamic programming cannot be used either, since the minimized cost function is neither concave nor convex globally. We modify the standard dynamic programming algorithm and show how familiar, elementary arguments can be used to reach conclusions about the optimal policy with any finite number of groups. We show that under certain conditions it is optimal to focus the entire annual budget on one of the R groups at a time rather than divide it among several groups, as is often done in practice; faced with two identical groups whose only difference is their starting level of infection, it is optimal to focus on the group with fewer sick people. We also show that under certain conditions it remains optimal to focus on one group when faced with a wealth constraint instead of an annual budget.

Suggested Citation

  • Anderson, Soren & Laxminarayan, Ramanan & Salant, Stephen W., 2010. "Diversity or Focus? Spending to Combat Infectious Diseases When Budgets Are Tight," Discussion Papers dp-10-15, Resources For the Future.
  • Handle: RePEc:rff:dpaper:dp-10-15
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    References listed on IDEAS

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    1. Goldman Steven Marc & Lightwood James, 2002. "Cost Optimization in the SIS Model of Infectious Disease with Treatment," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 2(1), pages 1-24, April.
    2. Mark Gersovitz & Jeffrey S. Hammer, 2004. "The Economical Control of Infectious Diseases," Economic Journal, Royal Economic Society, vol. 114(492), pages 1-27, January.
    3. Gersovitz, Mark & Hammer, Jeffrey S., 2005. "Tax/subsidy policies toward vector-borne infectious diseases," Journal of Public Economics, Elsevier, vol. 89(4), pages 647-674, April.
    4. Herrmann, Markus & Gaudet, Gérard, 2009. "The economic dynamics of antibiotic efficacy under open access," Journal of Environmental Economics and Management, Elsevier, vol. 57(3), pages 334-350, May.
    5. Gardner Brown & Ramanan Laxminarayan, 1998. "Economics of Antibiotic Resistance," Discussion Papers in Economics at the University of Washington 0060, Department of Economics at the University of Washington.
    6. Philipson, Tomas J & Posner, Richard A, 1996. "The Economic Epidemiology of Crime," Journal of Law and Economics, University of Chicago Press, vol. 39(2), pages 405-433, October.
    7. Laxminarayan, Ramanan, 2003. "ACT Now or Later: The Economics of Malaria Resistance," Discussion Papers dp-03-51, Resources For the Future.
    8. Mark Eiswerth & Wayne Johnson, 2002. "Managing Nonindigenous Invasive Species: Insights from Dynamic Analysis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 23(3), pages 319-342, November.
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    Cited by:

    1. Park, Hojeong, 2016. "A real option analysis for stochastic disease control and vaccine stockpile policy: An application to H1N1 in Korea," Economic Modelling, Elsevier, vol. 53(C), pages 187-194.
    2. Rowthorn, Robert & Toxvaerd, Flavio, 2012. "The Optimal Control of Infectious Diseases via Prevention and Treatment," CEPR Discussion Papers 8925, C.E.P.R. Discussion Papers.

    More about this item

    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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