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The Economic Impact of HIV/AIDS. Shanta Devarajan. Key features of HIV/AIDS. Affects more than the victim Affects multiple sectors of the economy Requires resources to fight the disease. Households. Loss of income Productivity loss

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key features of hiv aids
Key features of HIV/AIDS
  • Affects more than the victim
  • Affects multiple sectors of the economy
  • Requires resources to fight the disease
households
Households
  • Loss of income
    • Productivity loss
      • Tea pickers in Kenya earned 17 percent less in the two years before they retired or died from AIDS
    • Earnings loss (absenteeism)
      • Sick sugar mill workers in South Africa lost 10 percent of earnings two years before retirement
households effect on others
Households: effect on others
  • Caregivers: South Africa (Survey of 771 AIDS households)
    • Two-thirds are women
    • 22 percent took time off from work
    • 20 percent had to forgo school or study time
    • 60 percent took time from other housework
key features of hiv aids5
Key features of HIV/AIDS
  • Affects more than the victim
  • Affects multiple sectors of the economy
  • Requires resources to fight the disease
households effect on others6
Households: effect on others
  • Orphans (as share of pop’n 17 and under)

2003 (due to AIDS) 2010

Botswana 20 15 24

South Africa 13 4.5 19

    • Lower incomes (higher dependency ratios)
    • Lower school enrolment rates (13 percent)
key features of hiv aids7
Key features of HIV/AIDS
  • Affects more than the victim
  • Affects multiple sectors of the economy
  • Requires resources to fight the disease
households effect on other sectors
Households: effect on other sectors
  • Health care costs (South Africa study)
    • AIDS households spend 33 percent of income on health care (compared with national average of 4 percent)
    • Funeral costs (four months’ salary)
firms effect on other sectors
Firms: effect on other sectors
  • Medical costs (25-35 percent of total)
  • Sick leave, productivity loss, training (20 percent of total)
  • Pension costs
  • Companies may find it profitable to introduce AIDS prevention and treatment plans, as well as revise their pension plans
  • Large companies more likely than smaller ones
key features of hiv aids10
Key features of HIV/AIDS
  • Affects more than the victim
  • Affects multiple sectors of the economy
  • Requires resources to fight the disease
macroeconomic costs
Macroeconomic costs
  • Labor supply (e.g., South African labor force expected to decline by 12.8 percent by 2010)
    • But: a 13 percent decline in labor supply reduces GDP by only 8 percent or so, implying that GDP per capita rises
macroeconomic costs cont d
Macroeconomic costs (cont’d)
  • Productivity losses (absenteeism, retraining workers, death benefits)
    • Estimated to add upto 15 percent to companies’ wage bill (South Africa, Cote d’Ivoire)
    • But: Large companies especially are able to adapt, reducing productivity losses
macroeconomic costs cont d13
Macroeconomic costs (cont’d)
  • Public finances
    • Increased health expenditures, reducing public investment
    • Reduces GDP growth
    • But: Assumes that public investment would have been productive
macroeconomic costs cont d15
Macroeconomic costs (cont’d)
  • Human capital
    • AIDS kills young adults
    • Reduces incentive and means to invest in children’s education
    • Reduces parents’ transmission of knowledge to their children
implications
Implications
  • Children’s ability to invest in their children’s education is lower, and so on…
  • Vicious cycle
  • Previous estimates of impact of AIDS may seriously underestimate the long-run impact
can economics help fight aids
Key features of HIV/AIDS

Affects more than the victim

Affects others sectors

Requires resources

Economic impact of HIV/AIDS

Common metric to evaluate impact on different people, sectors

Behavioral response

Measure of how much to spend on fighting AIDS

Build political support

Can economics help fight AIDS?