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Pandemic Effects in the Solow Growth Model

Author

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  • Carmona, Julio

    (Fundamentos del Análisis Económico. University of Alicante)

  • León, ángel

    (Fundamentos del Análisis Económico. University of Alicante)

Abstract

We show how diseases can affect economic growth in a Solow growth model, with population growth and no technical progress, but modified to include a saving rate that depends on the health status of the individual. We couple this model, in turn, with the SIS and SIR models of disease spreading. In these two models the spread of the infection proceeds according to the so called basic reproductive number. This number determines in which of the two possible equilibria, the disease free or the pandemic equilibrium, the economy ends. By inserting these two models of disease in our extended Solow growth model, we show that the steady state capital stock per non infected individual and output per capita are lower in the pandemic equilibrium, reflecting a contraction in the economy’s production possibilities frontier.

Suggested Citation

  • Carmona, Julio & León, ángel, 2021. "Pandemic Effects in the Solow Growth Model," QM&ET Working Papers 21-1, University of Alicante, D. Quantitative Methods and Economic Theory, revised 07 Apr 2022.
  • Handle: RePEc:ris:qmetal:2021_001
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    References listed on IDEAS

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    More about this item

    Keywords

    COVID-19; SIS; SIR; Solow model;
    All these keywords.

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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