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The Socio-Economic Distribution of AIDS Incidence and Output

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Author Info
Pedro de Araujo () (Colorado College)
Abstract

This paper investigates the effect of HIV/AIDS on steady state output in an overlapping generations economy calibrated to resemble sub-Sahara Africa. I use skill heterogeneity as a proxy for socioeconomic status and test scenarios where the AIDS epidemic affects skills differently. The results indicate that the effects of the epidemic are sensitive to the distribution of the disease across skills. In general, the effect is much greater as the epidemic mainly affects skilled workers. Output is found to be below a no-AIDS output in a range between 3% (10%), when only unskilled workers are affected, and 10% (28%), when only skilled workers affected, whenever the overall infection rate is 7% (20%). When investigating the hypothesis that AIDS affects skilled workers more severely than unskilled at the beginning of the epidemic, with the effect switching as the epidemic becomes more mature, the findings are that the economy can be 8% smaller along the transition path. In all scenarios where the epidemic is temporary, it would take 4 to 5 generations or about 90 years for sub-Saharan Africa to recover.

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Paper provided by Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington in its series Caepr Working Papers with number 2008-014_updated.

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Length: 51 pages
Date of creation: Sep 2008
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Handle: RePEc:inu:caeprp:2008-014updated

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Related research
Keywords: HIV/AIDS; capital-skill complementarity; heterogeneity; and sub-Sahara Africa;

Find related papers by JEL classification:
E20 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)

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  1. Clive Bell & Shantayanan Devarajan & Hans Gersbach, 2003. "The long-run economic costs of AIDS : theory and an application to South Africa," Policy Research Working Paper Series 3152, The World Bank. [Downloadable!]
  2. Cuddington, John T, 1993. "Modeling the Macroeconomic Effects of AIDS, with an Application to Tanzania," World Bank Economic Review, Oxford University Press, vol. 7(2), pages 173-89, May.
  3. Mwabu, Germano & Schultz, T Paul, 2000. "Wage Premiums for Education and Location of South African Workers, by Gender and Race," Economic Development and Cultural Change, University of Chicago Press, vol. 48(2), pages 307-34, January.
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  5. Pedro S. Amaral & Erwan Quintin, 2003. "The Implications of Capital-Skill Complementarity in Economies with Large Informal Sectors," Macroeconomics 0309017, EconWPA. [Downloadable!]
    Other versions:
  6. Cuddington, John T & Hancock, John D, 1995. "The Macroeconomic Impact of AIDS in Malawi: A Dualistic, Labour Surplus Economy," Journal of African Economies, Oxford University Press, vol. 4(1), pages 1-28, May.
  7. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April. [Downloadable!] (restricted)
    Other versions:
  8. Chris Papageorgiou & John Duffy & Fidel Perez-Sebastian, . "Capital-Skill complementarity? Evidence from a Panel of Countries," Departmental Working Papers 2003-12, Department of Economics, Louisiana State University. [Downloadable!]
    Other versions:
  9. Simon Dixon & Scott McDonald & Jennifer Roberts, 2001. "AIDS and economic growth in Africa: a panel data analysis," Journal of International Development, John Wiley & Sons, Ltd., vol. 13(4), pages 411-426. [Downloadable!]
  10. de Walque, Damien, 2006. "Who gets AIDS and how ? The determinants of HIV infection and sexual behaviors in Burkina Faso, Cameroon, Ghana, Kenya, and Tanzania," Policy Research Working Paper Series 3844, The World Bank. [Downloadable!]
  11. Cuddington, John T. & Hancock, John D. & Rogers, Carol Ann, 1994. "A dynamic aggregative model of the AIDS epidemic with possible policy interventions," Journal of Policy Modeling, Elsevier, vol. 16(5), pages 473-496, October. [Downloadable!] (restricted)
  12. Corrigan, Paul & Glomm, Gerhard & Mendez, Fabio, 2005. "AIDS crisis and growth," Journal of Development Economics, Elsevier, vol. 77(1), pages 107-124, June. [Downloadable!] (restricted)
  13. Bloom, David E. & Mahal, Ajay S., 1997. "Does the AIDS epidemic threaten economic growth?," Journal of Econometrics, Elsevier, vol. 77(1), pages 105-124, March. [Downloadable!] (restricted)
  14. Chris Papageorgiou & Marianne Saam, . "Two-Level CES Production Technology in the Solow and Diamond Growth Models," Departmental Working Papers 2005-07, Department of Economics, Louisiana State University. [Downloadable!]
    Other versions:
  15. R Bonnel, 2000. "HIV/AIDS and Economic Growth: A Global Perspective," South African Journal of Economics, Economic Society of South Africa, vol. 68(5), pages 360-379, December. [Downloadable!] (restricted)
  16. Cuddington, John T. & Hancock, John D., 1994. "Assessing the impact of AIDS on the growth path of the Malawian economy," Journal of Development Economics, Elsevier, vol. 43(2), pages 363-368, April. [Downloadable!] (restricted)
  17. Nicoli Nattrass*, 2003. "Aids, Economic Growth And Income Distribution In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 71(3), pages 428-454, 09. [Downloadable!] (restricted)
  18. C Arndt & J D Lewis, 2000. "The Macro Implications of HIV/AIDS in South Africa: A Preliminary Assessment," South African Journal of Economics, Economic Society of South Africa, vol. 68(5), pages 380-392, December. [Downloadable!] (restricted)
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