Quantifying the Gains from Eradicating Malaria using a Structural Model

Minki Kim

Small Research Grant

Understanding the gains of eradicating malaria is closely linked to understanding the process of structural transformation. The potential long-term effects of malaria eradication inevitably encompass demographic transition and increase in human capital investment, which have been argued to be key drivers of structural transformation. Previous literature pointed out that the macroeconomic benefits of malaria eradication might be small and take long time to materialise, due to the more-than-compensatory increase in population. However, the existing literature rarely goes further to consider how individuals respond to diseases by adjusting their fertility behaviours. Fertility is likely endogenous to mortality, and any increases in human capital accumulation as a result of lower morbidity may be amplified by lower fertility, leading to larger gains than previously estimated. This project seeks to quantify the aggregate gains from eradicating malaria taking into account human capital accumulation and endogenous fertility decisions.

This project employs a quantitative general equilibrium model in which households decide how many children to have and how much to invest in children’s human capital formation according to the quantity-quality trade-off. An important risk that households face in the model is the health risk (malaria), which is modelled as an idiosyncratic shock among children with two dimensions: mortality and morbidity. Children hit by the mortality shock lose their lives, and those who are hit by the morbidity shock experience lowered efficiency in human capital formation. This modelling approach reflects not just the life-threatening effects of malaria among children, but also the long-term cognitive damage that the disease leaves to those who survived from the infection. The model is estimated to match recent empirical evidence from a large-scale antimalarial campaign before being used to study several policy interventions, such as large-scale vaccine distribution and the eradication of other diseases.

From a policy perspective, thorough knowledge about the benefits and the costs involved in the eradication is necessary for making informed decisions. This is especially true in sub-Saharan African countries, where malaria is most prevalent and limited state capacity and lack of sufficient funds make eradication of the disease very costly. While the model will inform on the aggregate impacts of eradication, it also has the potential to be calibrated to a specific country, allowing policy analysis and recommendations targeted and catered to specific countries. It is worth mentioning that the timing of this research is especially relevant given that there has been a recent breakthrough in malaria vaccine development with the Jenners Institute of Oxford University reporting that the new malaria vaccine has been shown to be highly effective in trials conducted in Africa.

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