Pandemic effects in the Solow growth model

Area of Science:

• Epidemiology
• Economic Growth Theory
• Health Economics

Background:

• Economic growth models traditionally do not account for disease impacts.
• Health status is a crucial determinant of individual economic behavior, specifically saving rates.
• Disease dynamics can be modeled using epidemiological frameworks like SIS and SIR models.

Purpose of the Study:

• To analyze the effect of diseases on economic growth within a modified Solow growth model.
• To integrate epidemiological models (SIS and SIR) into economic growth theory.
• To determine the long-term economic consequences of disease spread.

Main Methods:

• Modification of the Solow growth model to incorporate a health-dependent saving rate.
• Integration of the modified Solow model with the susceptible-infected-susceptible (SIS) and susceptible-infected-recovered (SIR) disease models.
• Analysis of economic equilibria under disease-free and pandemic scenarios, guided by the basic reproductive number.

Main Results:

• The saving rate is directly influenced by individual health status.
• The basic reproductive number dictates whether an economy converges to a disease-free or a pandemic equilibrium.
• Output per capita is consistently lower in the pandemic steady state compared to the disease-free state.

Conclusions:

• Disease prevalence leads to a contraction in the economy's production possibilities frontier.
• The integration of health dynamics into economic models is essential for understanding long-term growth.
• Pandemic scenarios result in a diminished economic output per capita.