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Aggregate Effect of AIDS on Development

Author

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  • Raul Santaeulalia-Llopis

    (University of Pennsylvania)

Abstract

To explore the quantitative implications that AIDS has for the development path of the Sub- Saharan African economies, I extend a standard theory of economic development that reproduces the process of industrialization, Hansen and Prescott (2002), with a population model that relates the age distribution of the population of each period to the preceding one via a fertility process, a mortality process and an aging process. This population process captures the main channels through which AIDS, raising mortality rates of young adults and lowering fertility rates, affects populations over time: (i) reshapes the age distribution of the population, thinning the ranks of working-age groups (the share of children and old adults per worker raises by as much as 20-25% in highly infected countries), (ii) reduces population growth (by as much as .08% per percentage point of HIV prevalence), and (iii) reduces life expectancy (by as much as 15-20 years). In addition, AIDS (iv) reduces the individual labor efficiency of the sick with an aggregate loss of 0.3% per percentage point of HIV prevalence. When I incorporate the AIDS epidemic as in (i)-(iv) into a model economy calibrated to an African country unaffected by AIDS, I find that the AIDS epidemic reduces per capita income by as much as 12% at the peak of the epidemic. I find also that the AIDS epidemic slows down the transition from agriculture to industry by about one century for the most highly infected countries.

Suggested Citation

  • Raul Santaeulalia-Llopis, 2008. "Aggregate Effect of AIDS on Development," 2008 Meeting Papers 533, Society for Economic Dynamics.
    • Handle: RePEc:red:sed008:533
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    Cited by:

    1. Paul Cahu & Falilou Fall, 2011. "Accounting for the effects of AIDS on growth in Sub-Saharan Africa," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00609798, HAL.
    2. Francesco Strobbe & Claudia Olivetti & Mireille Jacobson, 2010. "Breaking the Net: Family Structure and Street Children in Zambia," Global Development Institute Working Paper Series 11110, GDI, The University of Manchester.
    3. Christian Herdinata & Fransisca D. Pranatasari, 2022. "Impact of COVID-19 on Organizational Support in Financial Technology," Economies, MDPI, vol. 10(8), pages 1-14, July.
    4. Durevall, Dick & Lindskog, Annika, 2008. "Uncovering the Effect of the HIV Epidemic on Fertility in Sub-Saharan Africa: The Case of Malawi," Working Papers in Economics 318, University of Gothenburg, Department of Economics, revised 01 Feb 2009.
    5. Marinescu, Ioana, 2014. "HIV, wages, and the skill premium," Journal of Health Economics, Elsevier, vol. 37(C), pages 181-197.
    6. Goodell, John W., 2020. "COVID-19 and finance: Agendas for future research," Finance Research Letters, Elsevier, vol. 35(C).
    7. Raül Santaeulàlia-Llopis, 2021. "Economic Activity and Public Health Policy: A Note," Working Papers 1284, Barcelona School of Economics.
    8. Victoria Baranov & Hans-Peter Kohler, 2018. "The Impact of AIDS Treatment on Savings and Human Capital Investment in Malawi," American Economic Journal: Applied Economics, American Economic Association, vol. 10(1), pages 266-306, January.
    9. Asror Nigmonov & Syed Shams, 2021. "COVID-19 pandemic risk and probability of loan default: evidence from marketplace lending market," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-28, December.

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