Infectious disease and preventive behavior in an overlapping generations model

This paper incorporates prevalence of disease and agent's preventive behavior (i.e., health investment) into a small open overlapping generations model and investigates the dynamic behaviors of the competitive equilibrium allocation. Using the model, it is shown that agents' 'prevalence-elastic behaviors', which are supported from empirical studies, can be obtained, and that such agents' behaviors cause the cyclicity of the spread of disease. We also show that although the agents' preventive behavior in a competitive equilibrium may be insufficient because of the existence of external effects, a one-shot medical aid from foreign countries does not necessarily improve the agents' welfare in the Pareto sense.