The Long-Run Economic Impact of AIDS
Pedro C. Ferreira
Graduate School of Economics at Fundacao Getulio Vargas (EPGE/FGV)
Samuel D. Pessoa
Graduate School of Economics at Fundacao Getulio Vargas (EPGE/FGV); University of Pennsylvania
February 10, 2003
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 model 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.
Number of Pages in PDF File: 30
Keywords: HIV/AIDS, economic growth, schooling
JEL Classification: O40, I10, O50working papers series
Date posted: June 23, 2003
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