Consider the Solow growth model in which population evolves according to: N′ = (1 + n)N where N is the population (labor force) in the current period, N′ is the population (labor force) in the future period, and n is the population growth rate. There are public health expenditures that takes the form of government spending, G = gN, where G is the current period government spending on health care, g is the per-capita health spending in the current period. The production technology is given by Y = zKαN1−α where Y is the output of the consumption good, z is the total factor productivity, K is the current period capital stock, aN is the labour input, and 0 < α < 1 is a parameter. Consumers save a constant fraction, s, of their disposable income, where 0 < s < 1. (a) Suppose that the economic is hit by a pandemic (e.g. Covid-19). The government responds to the pandemic by raising the public health spending per person (e.g spending on vaccination) temporarily (i.e. one-period only). Using the Solow growth model, assess the impact of the pandemic.
Consider the Solow growth model in which population evolves according to: N′ = (1 + n)N where N is the population (labor force) in the current period, N′ is the population (labor force) in the future period, and n is the population growth rate. There are public health expenditures that takes the form of government spending, G = gN, where G is the current period government spending on health care, g is the per-capita health spending in the current period. The production technology is given by Y = zKαN1−α where Y is the output of the consumption good, z is the total factor productivity, K is the current period capital stock, aN is the labour input, and 0 < α < 1 is a parameter. Consumers save a constant fraction, s, of their disposable income, where 0 < s < 1.
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(a) Suppose that the economic is hit by a pandemic (e.g. Covid-19). The government responds to the pandemic by raising the public health spending per person (e.g spending on vaccination) temporarily (i.e. one-period only). Using the Solow growth model, assess the impact of the pandemic.
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