Outbreaks of infectious disease (e.g., SARS) have the potential to induce the destabilization of regional economies, and to generate a drag on the productivity of the global economy. Outbreaks will typically impede the flow of trade goods from infected to uninfected regions, and such goods may be subject to quarantine or outright embargo. Such pathogen-induced impediments to the flow of goods and persons are exacerbated by fear and panic, which may be manipulated by domestic economic interest groups (as in the BSE affair) or by the global media. In certain cases (such as that of SARS) one may observe the complete embargo of possibly infected goods until the etiology of the pathogen, and its vectors of transmission, can be determined with some precision. Infectious disease may also undermine foreign investment in seriously affected regions because of perceptions of economic and political instability (e.g., HIV/AIDS), and fears that a firm's workers may succumb to the contagion, eroding the base of human capital within that firm. Thus, risk premiums will be significantly elevated in regions of significant pathogen prevalence. Collectively, this creates problems for global health governance as affected states have powerful disincentives to report outbreaks of disease to the WHO, or to accurately report the extent of the infection.
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