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The long run economic impact of AIDS

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  • Ferreira, Pedro Cavalcanti
  • Pessôa, Samuel de Abreu

Abstract

This paper studies the long-run impact of HIV/AIDS on per capita income and education. We introduce a channel from HIV/AIDS to long-run income that has been overlooked by the literature, the reduction of the incentives to study due to shorter expected longevity. We work with a continuous time overlapping generations mo deI in which life cycle features of savings and education decision play key roles. The simulations predict that the most affected countries in Sub-Saharan Africa will be in the future, on average, a quarter poorer than they would be without AIDS, due only to the direct (human capital reduction) and indirect (decline in savings and investment) effects of life-expectancy reductions. Schooling will decline on average by half. These findings are well above previous results in the literature and indicate that, as pessimistic as they may be, at least in economic terms the worst could be yet to come.

Suggested Citation

  • Ferreira, Pedro Cavalcanti & Pessôa, Samuel de Abreu, 2003. "The long run economic impact of AIDS," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 475, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    • Handle: RePEc:fgv:epgewp:475
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    Cited by:

    1. BOUCEKKINE, Raouf & LAFFARGUE, Jean-Pierre, 2007. "A theory of dynamics and inequalities under epidemics," LIDAM Discussion Papers CORE 2007037, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Sebnem Kalemli-Ozcan, 2012. "AIDS, “reversal” of the demographic transition and economic development: evidence from Africa," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(3), pages 871-897, July.
    3. Glenn-marie Lange, 2004. "Wealth, Natural Capital, and Sustainable Development: Contrasting Examples from Botswana and Namibia," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 29(3), pages 257-283, November.
    4. Raouf Boucekkine & Bity Diene & Theophile Azomahou, 2008. "Growth Economics of Epidemics: A Review of the Theory," Mathematical Population Studies, Taylor & Francis Journals, vol. 15(1), pages 1-26.
    5. Friedman, Willa Helterline, 2018. "Antiretroviral drug access and behavior change," Journal of Development Economics, Elsevier, vol. 135(C), pages 392-411.
    6. Marla, Ripoll & Juan, Cordoba, 2006. "The Role of Education in Development," MPRA Paper 1864, University Library of Munich, Germany, revised Feb 2007.
    7. Raouf Boucekkine & Raouf Boucekkine, 2006. "Medium term dynamics and inequalities under epidemics," Computing in Economics and Finance 2006 209, Society for Computational Economics.
    8. Azomahou, Theophile, 2008. "The Economic Impact of AIDS in Sub-Saharan Africa," MERIT Working Papers 2008-038, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    9. Bruhns, Ramona, 2006. "The Long-run Effects of HIV/AIDS in Kenya," MPRA Paper 952, University Library of Munich, Germany.

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