Author(s):	Clive Bell, Hans Gersbach
Publication Date:	December 2004
Keyword(s):	AIDS, epidemic diseases, growth, human capital, pooling risks
JEL(s):	E13, I12, I21, O41
Programme Areas:	International Macroeconomics, Institutions and Economic Performance
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=4800

We study the formation of human capital and its transmission across generations when a society is assailed by an epidemic disease such as AIDS. We establish that the disease can severely retard economic growth, even to the point of leading to an economic collapse. We also show that the epidemic may exacerbate inequality. Pooling health risks in the society puts the society on a ?make and break? road.