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Controlling an infectious disease and sustainability: lessons from Hartwick’s Rule

Can Mavi and Benteng Zou ()

No 2022.06, Working Papers from FAERE - French Association of Environmental and Resource Economists

Abstract: In this study, we present a modified Hartwick rule encompassing the dynamics of pandemic, such as COVID-19. In our setting, the labor productivity gradually improves after the pandemic shock and may even go beyond its pre-pandemic level due to the remote work and digitalization as also suggested by the empirical evidence. We demonstrate that a gradual labor productivity increase helps to conserve natural resources. We provide a theoretical foundation for a "sooner-the-better" strategy to control a pandemic, and we show that policy maker should implement a "whatever it costs" response to ensure that the transmission rate of the virus is below the recovery rate from the very beginning of the pandemic. Otherwise, the economy cannot have a sustained utility. We also analyze the implications of an "uncertain" pandemic on the intertemporal dynamics of natural resource and capital accumulation under the maximin criterion. Another important finding is that there exists a new economic and public health trade-off since a strong prevention policy is shown to decrease capital accumulation.

Keywords: Maximin principle; Pandemic; Intergenerational Equity; Hartwick's rule (search for similar items in EconPapers)
JEL-codes: D8 Q01 Q3 Q56 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2022-10
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http://faere.fr/pub/WorkingPapers/Mavi_Zou_FAERE_WP2022.06.pdf First version, 2022 (application/pdf)

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