ABSTRACT
Chapter 5 aims to assess the effects of an epidemic on economic growth. The analysis is conducted using an epidemiological-economic model that combines the SIR (Susceptible–Infectious/Infected– Recovered/Removed) epidemiological model proposed by Kermack and McKendrick in 1927 with the neoclassical model of economic growth proposed by Solow in 1956. Multiple potential scenarios of an epidemic were adopted. In the scenarios in which the government has no access to a vaccine, it was assumed that the government reduces the intensity of social and economic activity gradually or abruptly. The scenarios with vaccination are divided into those with slow and those with rapid progress in immunization coverage of the population; in both cases the government imposes restrictions on social and economic activity.
The results of the analyses conducted indicate that an economy without access to a vaccine is affected by production drops reaching over a three-year period 6.7% to 9.8%, if severe restrictions are imposed on social and economic activity, or 2.2% to 3.5%, if mild restrictions are imposed. A slow pace of progress in immunization coverage combined with severe restrictions will lead to accumulated drops in production by about 5.4 to about 8.1% while mild restrictions lead to accumulated drops in production by about 2.0–3.2%. A rapid pace of progress in immunization coverage of the population reduces accumulated drops in production to about 4.6–6.6%, if severe restrictions are imposed or to 1.9–2.9%, if a liberal approach is adopted. Scenario analyses demonstrate that the early administration of a vaccine significantly reduces the accumulated drop in production. Both accumulated production drops and the depth of recession are milder in mature economies.
