Working Paper: CEPR ID: DP4800
Authors: Clive Bell; Hans Gersbach
Abstract: We study the formation of human capital and its transmission across generations when a society is assailed by an epidemic disease such as AIDS. We establish that the disease can severely retard economic growth, even to the point of leading to an economic collapse. We also show that the epidemic may exacerbate inequality. Pooling health risks in the society puts the society on a ‘make and break’ road.
Keywords: AIDS; epidemic diseases; growth; human capital; pooling risks
JEL Codes: E13; I12; I21; O41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| AIDS destroys existing human capital (O15) | productivity (O49) |
| AIDS destroys existing human capital (O15) | economic decline (F44) |
| AIDS undermines mechanisms that generate human capital formation (O15) | cycle of poverty and diminished productivity in future generations (I32) |
| parental mortality reduces quality of child-rearing and educational investment (J13) | cycle of poverty and diminished productivity in future generations (I32) |
| children of AIDS victims grow up with limited education and resources (O15) | low human capital accumulation (J24) |
| initial effects of AIDS exacerbate economic inequality (I14) | inadequate care or education for orphans (I24) |
| cumulative effects of AIDS processes (I12) | collapse of economic productivity (O49) |