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Untimely destruction: pestilence, war, and accumulation in the long run

Published online by Cambridge University Press:  12 January 2024

Clive Bell ,
Hans Gersbach Open the ORCID record for Hans Gersbach [Opens in a new window]  and
Evgenij Komarov
Clive Bell
Affiliation:
University of Heidelberg, Heidelberg, Germany
Hans Gersbach*
Affiliation:
KOF Swiss Economic Institute at ETH Zurich and CEPR, Zurich, Switzerland
Evgenij Komarov
Affiliation:
CER-ETH – Center of Economic Research at ETH Zurich, Zurich, Switzerland
*
Corresponding author: Hans Gersbach; Email: hgersbach@ethz.ch
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Abstract

This paper analyses the effects of disease and war on the accumulation of human and physical capital. We employ an overlapping generation framework in which young adults, motivated by old-age provision and possibly altruism, make decisions about investments in schooling and capital. A poverty trap exists for a wide range of constant war losses and premature adult mortality. If parents are altruistic and the sub-utility function for own consumption is more concave than that for their evaluation of their children’s full income in adulthood, the only possible steady-state growth path involves full education. Otherwise, steady-state paths with incompletely educated children may exist. When mortality and destruction rates are stochastic, the initial boundary conditions and agents’ beliefs have a strong influence on the paths generated by a sequence of shocks. Calibrating the model to Kenya, simulations for stochastic settings yield the finding that a trap exists and is always avoided, but the chances of a slow recovery are substantial.

Keywords

Capital accumulation and destructionpremature mortalitypoverty trapsstochastic environments
Type
Articles
Information
Macroeconomic Dynamics , First View , pp. 1 - 42
Copyright
© The Author(s), 2024. Published by Cambridge University Press

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Footnotes

†

Earlier versions of this paper were presented at the Annual Growth and Economic Policy Conference, University of Durham Business School, 14–15 May, 2016, the UNU-WIDER Conference on Human Capital and Growth, Helsinki, 6–7 June, 2016, and the University of Durham Business School in 2020. We are grateful to the participants, especially Parantap Basu, for their constructive suggestions. We are also indebted to two anonymous referees and an associate editor for extensive and valuable comments, which have done much to improve the paper. We retain all responsibility for surviving errors of analysis and opinion.

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