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The Socio-Economic Distribution of AIDS Incidence and Output

51 Pages Posted: 13 Jun 2008 Last revised: 14 Sep 2008

Pedro de Araujo

Colorado College

Date Written: September 11, 2008


This paper investigates the effect of HIV/AIDS on steady state output in an overlapping generations economy calibrated to resemble sub-Sahara Africa. I use skill heterogeneity as a proxy for socioeconomic status and test scenarios where the AIDS epidemic affects skills differently. The results indicate that the effects of the epidemic are sensitive to the distribution of the disease across skills. In general, the effect is much greater as the epidemic mainly affects skilled workers. Output is found to be below a no-AIDS output in a range between 3% (10%), when only unskilled workers are affected, and 10% (28%), when only skilled workers affected, whenever the overall infection rate is 7% (20%). When investigating the hypothesis that AIDS affects skilled workers more severely than unskilled at the beginning of the epidemic, with the effect switching as the epidemic becomes more mature, the findings are that the economy can be 8% smaller along the transition path. In all scenarios where the epidemic is temporary, it would take 4 to 5 generations or about 90 years for sub-Saharan Africa to recover.

Keywords: HIV/AIDS, capital-skill complementarity, heterogeneity, and sub-Sahara Africa

JEL Classification: E20

Suggested Citation

de Araujo, Pedro, The Socio-Economic Distribution of AIDS Incidence and Output (September 11, 2008). CAEPR Working Paper No. 2008-014. Available at SSRN: or

Pedro De Araujo (Contact Author)

Colorado College ( email )

14 E Cache La Poudre Street
Colorado Springs, CO 80903
United States

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