353 research outputs found

    The Economic Implications of Epidemics Old and New

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    The outbreak of Severe Acute Respiratory Syndrome (SARS) in the winter of 2002–03 raised the specter of a new, unknown and uncontrollable infectious disease that spreads quickly and is often fatal. Certain branches of economic activity, notably tourism, felt its impact almost at once, and investor expectations of a safe and controlled investment climate were brought into question. Part of the shock of SARS was the abrupt reversal of a mounting legacy of disease control that had altered societies’ expectations from coping with waves of epidemics of smallpox, cholera, and measles, among other diseases, to complacency with the virtual elimination of disease epidemics. This paper analyzes the economic implications of the Great Plague in the fourteenth century, the 1918–19 influenza epidemic, HIV/AIDS and SARS to demonstrate the short- and long-term effects of different kinds of epidemics.severe acute respiratory syndrome (SARS), infectious disease, epidemics

    AIDS and dualism : Ethiopia's burden under rational expectations

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    An AIDS epidemic threatens Ethiopia with a long wave of premature adult mortality, and thus with an enduring setback to capital formation and economic growth. The authors develop a two-sector model with three overlapping generations and intersectorally mobile labor, in which young adults allocate resources under rational expectations. They calibrate the model to the demographic and economic data, and perform simulations for the period ending in 2100 under alternative assumptions about mortality with and without the epidemic. Although the epidemic does not bring about a catastrophic economic collapse, which is hardly possible in view of Ethiopia's poverty and high background adult mortality, it does cause a permanent, downward displacement of the path of output per head, amounting to 10 percent in 2100. An externally funded program to combat the disease is socially very profitable.Population Policies,Economic Theory&Research,,Access to Finance,Adolescent Health

    Growth and Enduring Epidemic Diseases

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    This paper studies the formation of human capital and its transmission across generations when premature adult mortality is a salient feature of the demographic landscape, either permanently or in the form of a long-period wave that follows the outbreak of an epidemic. We establish several threshold properties of the model, for such a shock can severely retard economic growth, even to the point of leading to an economic collapse. Premature adult mortality may exacerbate inequality under nuclear family arrangements. Pooling mortality risks with equal treatment of all children may fend off, or even induce, a collapse, depending on the initial conditions and the size and duration of the shock. Awareness campaigns may also trigger a collapse by introducing undesirable expectational feedbacks.Epidemic Diseases, HIV/AIDS, Growth, Collapse, Pooling

    Shadow prices for a small open economy under uncertainty: Which expected values are valid

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    This paper re-examines the validity of using expected values to evaluate the social profitability of public investments under uncertainty. Departing from the usual assumption of an aggregate good, the setting is a small open economy that faces stochastic world prices for tradable goods and productivity levels in domestic production. It is shown that the so-called 'border price rule' - the vector of the shadow prices of traded goods is a scalar multiple of their world price vector - is, in general, invalid when the vector of mean world prices is used. The rule in that form is valid when the coefficient of risk aversion is 1. The error involved is small, however, even for values of that coefficient far from 1, including risk neutrality, when public expenditures are financed by lump-sum taxes. It is also small when preferences over goods are Cobb-Douglas and revenues are raised by taxing commodities. In contrast, using expected values to derive the shadow wage rate results in quite substantial errors when risk aversion is strong

    Rural Roads and National Welfare: Are 'Local' Methods of Evaluation Satisfactory?

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    Do ‘local’ methods of evaluation, such as partial equilibrium analysis at market prices or estimation of shadow prices, provide reliable assessments of a large rural roads programme’s social profitability? Consider a small open economy with one city and a rural hinterland, two traded goods, two non-tradables, two specific factors and mobile labour. The wage in some urban employment is regulated. Revenue is raised by a tariff or an excise on the imported good. Theory and model calibration with numerical examples establish that local methods perform rather dismally. With the equivalent variation yielded by general equilibrium analysis as benchmark, the first-order partial equilibrium method grossly underestimates a programme’s net benefit. Shadow prices derived on the assumption that all economic activity takes place at the border – a wholesale neglect of space – yield absurd underestimates. Two spatially sensitive variants of shadow pricing fall well short of remedying them

    THE DEVELOPMENT GAME: A Simulation Exercise in Economic Development

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    The Future of UNCTAD

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    Reply

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    Economic growth, education, and AIDS in Kenya : a long-run analysis

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    The AIDS epidemic threatens Kenya with a long wave of premature adult mortality, and thus with an enduring setback to the formation of human capital and economic growth. To investigate this possibility, the authors develop a model with three overlapping generations, calibrate it to the demographic and economic series from 1950 until 1990, and then perform simulations for the period ending in 2050 under alternative assumptions about demographic developments, including the counterfactual in which there is no epidemic. Although AIDS does not bring about a catastrophic economic collapse, it does cause large economic costs-and many deaths. Programs that subsidize post-primary education and combat the epidemic are both socially profitable-the latter strikingly so, due to its indirect effects on the expected returns to education-and a combination of the two interventions profits from a modest long-run synergy effect.Population Policies,Primary Education,Education For All,Adolescent Health,Economic Theory&Research

    The long-run economic costs of AIDS : theory and an application to South Africa

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    Most existing estimates of the macroeconomic costs of AIDS, as measured by the reduction in thegrowth rate of gross domestic product, are modest. For Africa-the continent where the epidemic has hit the hardest-they range between 0.3 and 1.5 percent annually. The reason is that these estimates are based on an underlying assumption that the main effect of increased mortality is to relieve pressure on existing land and physical capital so that output per head is little affected. The authors argue that this emphasis is misplaced and that, with a more plausible view of how the economy functions over the long run, the economic costs of AIDS are almost certain to be much higher. Not only does AIDS destroy existing human capital, but by killing mostly young adults, it also weakens the mechanism through which knowledge and abilities are transmitted from one generation to the next. The children of AIDS victims will be left without one or both parents to love, raise, and educate them. The model yields the following results. In the absence of AIDS, the counterfactual benchmark, there is modest growth, with universal and complete education attained within three generations. But if nothing is done to combat the epidemic, a complete economic collapse will occur within three generations. With optimal spending on combating the disease, and if there is pooling, growth is maintained, albeit at a somewhat slower rate than in the benchmark case in the absence of AIDS. If pooling breaks down and is replaced by nuclear families, growth will be slower still. Indeed, if school attendance subsidies are not possible, growth will be distinctly sluggish. In all three cases, the additional fiscal burden of intervention will be large, which reinforces the gravity of the findings.Economic Theory&Research,Public Health Promotion,Labor Policies,Health Monitoring&Evaluation,Decentralization,Health Monitoring&Evaluation,Population&Development,Economic Theory&Research,Street Children,Adolescent Health
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