On human capital accumulation in times of epidemic

Abstract

In the spirit of Goenka and Liu (2020), we study an endogenous growth model à la Lucas (1988) with an infectious disease spreading according to SIS dynamics and slowing human capital accumulation. Our model differs from theirs in some respects. We focus solely on the planner’s solution and cover both bounded and unbounded growth cases, under the assumption of more general preferences. Considering a single capital good allows us to provide a global analysis and in-depth understanding of the transition mechanisms. In the case of decreasing returns, the economy converges towards a stationary stock of human capital which decreases with the severity of the epidemic. In the case of unbounded growth, we recover the main results of Goenka and Liu (2020): the existence of a Balanced Growth Path with a negative impact of disease severity on growth rate. However, in our model, the growth path is only asymptotically balanced and confined within an exponential band during the transition.