The epidemic effect: Epidemics, institutions and human capital development

Abstract

Epidemics can negatively affect economic development unless they are mitigated by global governance institutions. We examine the effects of sudden exposure to epidemics on human capital outcomes using evidence from the African meningitis belt. Meningitis shocks reduce child health outcomes, particularly when the World Health Organization (WHO) does not declare an epidemic year. These effects are reversed when the WHO declares an epidemic year. Children born in meningitis shock areas in a year when an epidemic is declared are 10 percentage points (pp) less stunted and 8.2 pp less underweight than their peers born in non-epidemic years. We find evidence for the crowd-out of routine vaccination during epidemic years. We analyze data from World Bank projects and find evidence that an influx of health aid in response to WHO declarations may partly explain these reversals.