HIV/AIDS Contamination Risk, Savings and the Welfare Effects of Diagnostic Testing

CentER Discussion Paper Series No. 2007-50

22 Pages Posted: 5 Sep 2007

See all articles by Judith Lammers

Judith Lammers

University of Amsterdam; Tilburg University - Center for Economic Research (CentER)

A. C. Meijdam

Tilburg University - Center for Economic Research (CentER); Tilburg University - Department of Economics

Harrie A. A. Verbon

Tilburg University - CentER; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: July 2007

Abstract

This paper models the effect of a HIV/AIDS epidemic on saving behavior and studies the welfare effects of testing for HIV. The model specifies a utility function that includes both regular consumption, and medical expenditures. Medical expenditures generate more utility if individuals are HIV infected, but they are only able to purchase the optimal medical consumption after being tested HIV positive. The paper describes different effects on aggregate savings according to different stages of the epidemic. We show that the HIV epidemic decreases savings if especially young individuals are (perceived to be) affected by the virus, but may increase savings if individuals perceive a sizable probability of getting infected later in life. By the same token, the welfare effects of testing young individuals differs greatly from the welfare effects of testing older individuals, the reason being that the savings responses to testing differ according to whether old or young individuals are tested.

Keywords: saving behavior, perceived risk, HIV/AIDS, HIV testing, mortality, life-cycle model

JEL Classification: D83, D91, I12, E21

Suggested Citation

Lammers, Judith and Meijdam, A.C. (Lex) and Verbon, Harrie A. A., HIV/AIDS Contamination Risk, Savings and the Welfare Effects of Diagnostic Testing (July 2007). CentER Discussion Paper Series No. 2007-50, Available at SSRN: https://ssrn.com/abstract=1012243 or http://dx.doi.org/10.2139/ssrn.1012243

Judith Lammers (Contact Author)

University of Amsterdam ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

A.C. (Lex) Meijdam

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 23 85 (Phone)
+31 13 466 30 42 (Fax)

Tilburg University - Department of Economics

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Harrie A. A. Verbon

Tilburg University - CentER ( email )

Department of Economics
P.O. Box 90153
5000 LE Tilburg
Netherlands
+31 13 466 28 78 (Phone)
+31 13 466 30 42 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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