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HIV/AIDS Contamination Risk, Savings and the Welfare Effects of Diagnostic Testing

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  • Lammers, J.
  • Meijdam, A.C.
  • Verbon, H.A.A.

    (Tilburg University, Center for Economic Research)

Abstract

This paper models the effect of a HIV/AIDS epidemic on saving behavior and studies the welfare effects of testing for HIV. The model specifies a utility function that includes both regular consumption, and medical expenditures. Medical expenditures generate more utility if individuals are HIV infected, but they are only able to purchase the optimal medical consumption after being tested HIV positive. The paper describes different effects on aggregate savings according to different stages of the epidemic. We show that the HIV epidemic decreases savings if especially young individuals are (perceived to be) affected by the virus, but may increase savings if individuals perceive a sizable probability of getting infected later in life. By the same token, the welfare effects of testing young individuals differs greatly from the welfare effects of testing older individuals, the reason being that the savings responses to testing differ according to whether old or young individuals are tested.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2007-50.

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Date of creation: 2007
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Handle: RePEc:dgr:kubcen:200750

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Web page: http://center.uvt.nl

Related research

Keywords: saving behavior; perceived risk; HIV/AIDS; HIV testing; mortality; life-cycle model;

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  1. Zhang, Jie & Zhang, Junsen & Lee, Ronald, 2003. "Rising longevity, education, savings, and growth," Journal of Development Economics, Elsevier, vol. 70(1), pages 83-101, February.
  2. Ferreira, Pedro Cavalcanti Gomes & Pessoa, Samuel de Abreu, 2003. "The Long Run Economic Impact of AIDS," Economics Working Papers (Ensaios Economicos da EPGE) 475, FGV/EPGE Escola Brasileira de Economia e Finan├žas, Getulio Vargas Foundation (Brazil).
  3. Alwyn Young, 2004. "The Gift of the Dying: The Tragedy of AIDS and the Welfare of Future African Generations," NBER Working Papers 10991, National Bureau of Economic Research, Inc.
  4. Kochar, Anjini, 2004. "Ill-health, savings and portfolio choices in developing economies," Journal of Development Economics, Elsevier, vol. 73(1), pages 257-285, February.
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