Sunday, October 5, 2008

HIV/AIDS: Boon or bane to Africa?

Going by the general logic, it might sound fine when some one argues that HIV/AIDS (which has already killed more than 32 million people worldwide) might increase per capita income in Africa because deaths caused by this deadly virus will reduce population and increase the size of economic pie for the surviving people. Obviously, this logic banks on the assumption that GDP growth either increases or remains equal while population growth is dragged down by HIV/AIDS.

Is there something wrong with this argument? It might seem perfectly okay if you just follow the way GDP per capita is computed in economics. However, in practice evidence points otherwise. A study found that HIV/AIDS does little to reduce fertility rates among non-infected women and it will very likely lower future per capita income in Africa because of devastation in human capital accumulation. An explanation by the authors of the paper is available here.

…Women who are HIV-positive have approximately 20% lower probability of giving birth in a given year compared to women who are HIV-negative. This result is fairly robust across countries and remains even after we control for condom use and other measures of risky sexual behaviour. Our investigation of births prior to 1986 (prior to the on-set of the HIV/AIDS) using women's fertility histories suggests that unobserved heterogeneity is not driving our results.

…In high HIV countries such as Kenya and Lesotho, the effect of community HIV prevalence on fertility of non-infected women is actually positive and statistically significant. However, when we pool all the countries we do not find a statistically significant effect.

…Will the fertility response to HIV reinforce or offset the declines in population due to mortality? Our results show that only fertility of infected women will decline and hence the total impact of HIV on the aggregate economy is much smaller than the effect implied by Young (2005). There is an extensive literature that documents substantial declines in human capital accumulation as a result of the disease. Complementary to these results, our evidence suggests that HIV/AIDS is likely to decrease rather than increase future per capita incomes in Africa.