Premium
Environment, public debt, and epidemics
Author(s) -
Davin Marion,
Fodha Mouez,
Seegmuller Thomas
Publication year - 2023
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/jpet.12566
Subject(s) - debt , economics , subsidy , per capita , convergence (economics) , welfare , public capital , inequality , fiscal policy , monetary economics , public health , public economics , macroeconomics , public investment , environmental health , population , market economy , medicine , mathematical analysis , mathematics , nursing
We study whether fiscal policies, especially public debt, can help to curb the macroeconomic and health consequences of epidemics. Our approach is based on three main features: we introduce the dynamics of epidemics in an overlapping generations model to take into account that old people are more vulnerable; people are more easily infected when pollution is high; public spending in health care and public debt can be used to tackle the effects of epidemics. We show that fiscal policies can promote convergence to a stable disease‐free steady state. When public policies are not able to permanently eradicate the epidemic, public debt, and income transfers could reduce the number of infected people and increase capital and GDP per capita. As a prerequisite, pollution intensity should not be too high. Finally, we define a household subsidy policy that eliminates income and welfare inequalities between healthy and infected individuals.