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AIDS and dualism : Ethiopia's burden under rational expectations

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  • Bell, Clive
  • Koukoumelis, Anastasios

Abstract

An AIDS epidemic threatens Ethiopia with a long wave of premature adult mortality, and thus with an enduring setback to capital formation and economic growth. The authors develop a two-sector model with three overlapping generations and intersectorally mobile labor, in which young adults allocate resources under rational expectations. They calibrate the model to the demographic and economic data, and perform simulations for the period ending in 2100 under alternative assumptions about mortality with and without the epidemic. Although the epidemic does not bring about a catastrophic economic collapse, which is hardly possible in view of Ethiopia's poverty and high background adult mortality, it does cause a permanent, downward displacement of the path of output per head, amounting to 10 percent in 2100. An externally funded program to combat the disease is socially very profitable.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4919.

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Date of creation: 01 Apr 2009
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Handle: RePEc:wbk:wbrwps:4919

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Keywords: Population Policies; Economic Theory&Research; Access to Finance; Adolescent Health;

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