The Long-Run Economic Costs of AIDS: Theory and an Application to South Africa

Abstract

We thank Bernhard Pachl, Ramona Schrepler (who did all of the programming) and Lars Siemers for excellent research assistance, and Alexandra Holten for the skilful and patient typing of a trying manuscript.We are also grateful to participants in several seminars at the World Bank for their valuable comments and suggestions, while absolving them of responsibility for any errors of opinion or analysis that remain. Finally, the opinions expressed in the paper are ours as individual scholars, and not necessarily those of our respective institutions.

Growth and enduring epidemic diseases

“…It is plausible that the father's and mother's contributions to this process are not perfect 6 substitutes, in which case, 2z(1) > max[z(2), z(3)], and z(2) may not be equal to z (3). For simplicity, however, we restrict the possibilities as follows:…”

“…First, there is the general empirical observation that good health has a positive and statistically significant effect on aggregate also stresses that widespread diseases are a formidable barrier to economic growth. Second,3 there are studies of the macroeconomic effects of AIDS. Papers that adopt an OLG framework have chosen somewhat different points of emphasis.…”

“…The basic model, which builds on Bell and Gersbach (2001) and Bell, Devarajan and Gersbach (2003) by combining epidemiological and economic dynamics, is set out in Section 2. The dynamics of the system under both stationary and non-stationary mortality profiles are analyzed in Section 3, paying special attention to the conditions for an economic collapse to occur.…”

Negative Reality of the HIV Positives: Evaluating Welfare Loss in a Low Prevalence Country

“…McDonald and Roberts, 2006) emphasizes the transmission of human capital across generations and concludes that by disrupting the mechanism that drives the process of the transmission of knowledge and abilities from one generation to the next, the AIDS epidemic will result in a substantial slowdown of economic growth. Part of the analysis relies on the dynamic implication of the mechanism that AIDS lowers investment in human capital of children since "… the expected pay-off (from this investment) depends on the level of premature mortality among the children when they attain adulthood" (Bell, Devarajan and Gersbach, 2006, page 59; our italics). This mechanism may be applicable for countries like South Africa and Kenya where the HIV/AIDS prevalence rate has reached 20% and 25% respectively, but is not quite relevant for India with a prevalence rate of just 0.36% where there are many other compelling reasons for not sending the children to schools.…”

“…5 To this end we collect data on 371 families affected by HIV and 479 families not affected by HIV from four different regions of India covering both the low and high HIV prevalence states. 6 We estimate family utility function parameters that measure the relative importance of consumption, schooling of children and mental health, which in turn depends on current and expected future health as well as HIV status in the family.…”