Externality exists in healthcare when an individual benefits from others being healthy as it reduces the probability of getting sick from illness. Healthy workers are considered to be the more productive labourers leading to a country's positive economic growth over time. Several research studies have modelled disease transmission and its economic impact on a single country in isolation. We developed a two-country disease-economy model that explores disease transmission and cross-border infection of disease for its impacts. The model includes aspects of a worsening and rapid transmission of disease juxtaposed by positive impacts to the economy from tourism. We found that high friction affects the gross domestic product (GDP) of the lower-income country more than the higher-income country. Health aid from one country to another can substantially help grow the GDP of both countries due to the positive externality of disease reduction. Disease has less impact to both economies if the relative cost of treatment over an alternative (e.g. vaccination) is lower than the baseline value. Providing medical supplies to another country, adopting moderate friction between the countries, and finding treatments with lower costs result in the best scenario to preserve the GDP of both countries.
Keywords: SIR model; Solow model; externality; health aid; infectious disease.
© 2021 The Authors.