The Long-Run Economic Impact of Aids

30 Pages Posted: 23 Jun 2003

See all articles by Pedro C. Ferreira

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

Date Written: February 10, 2003

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 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.

Keywords: HIV/AIDS, economic growth, schooling

JEL Classification: O40, I10, O50

Suggested Citation

Cavalcanti Ferreira, Pedro and Pessoa, Samuel D., The Long-Run Economic Impact of Aids (February 10, 2003). Available at SSRN: https://ssrn.com/abstract=411782 or http://dx.doi.org/10.2139/ssrn.411782

Pedro Cavalcanti Ferreira (Contact Author)

Graduate School of Economics at Fundacao Getulio Vargas (EPGE/FGV) ( email )

Praia de Botafogo 190/1125, CEP
Rio de Janeiro RJ 22253-900
Brazil
+55 21 559 5840 (Phone)
+55 21 553 8821 (Fax)

Samuel D. Pessoa

Graduate School of Economics at Fundacao Getulio Vargas (EPGE/FGV) ( email )

Praia de Botafogo 190/1125, CEP
Rio de Janeiro RJ 22253-900
Brazil
+55 21 559 5833 (Phone)
+55 21 552 4898 (Fax)

University of Pennsylvania ( email )

Department of Economics
Philadelphia, PA 19104-6370
United States

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