Transmissible diseases, vaccination and inequality

We construct a Susceptible-Infected-Vaccinated Economic two-sector growth model to explore the dynamics of inequality in an economy with distinct groups of workers exposed to a transmissible disease. Our analysis reveals a spectrum of outcomes in the long term, ranging from a disease-free economic environment to a scenario where only the most susceptible group suffer from the disease. Long-term outcomes are influenced by the reproduction
rates both of the overall economy and those of the two groups of workers. If one group remains infected over time, the other will surely follow, leading to a perpetual disease burden for both. Additionally, because long term equilibria may not be unique, there’s a possibility of long-term uncertainty, posing additional challenges for policymakers. Notably, our calibrated model suggests that if the vaccination rate exceeds 24%, the relationship between disease exposure and inequality in capital assets becomes non-monotonic.