A note on infectious disease, economic growth, and related government policy

Abstract

Abstract Introducing susceptible-infected-recovered epidemiology dynamics with vaccines into an endogenous growth model, we investigate the impact of government infectious disease policy on macroeconomic performance. We find that any expenditure that improves health, whether to reduce the contact rate or increase the recovery rate or the vaccination rate, and regardless of whether it comes directly from the households or the government, has a positive impact on economic growth, but does not necessarily improve the welfare. The reason people’s health has improved but their welfare has fallen is because government expenditures must be covered by taxes, which will reduce their disposable income and consumption.