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.

Economics, India and Pakistan

Better trade relations (should) overshadow military might and enmity! India and Pakistan cannot afford to quibble around LOC and Kashmir issues forever. SAFTA is virtually dead just because of cold ties between these two nations. Every time there is a SAARC summit, the central focus is on bitter ties between these two countries rather than on regional trade, poverty, and cooperation.

...Not only does Mr. Zardari want better ties with Delhi, he notes that "there is no other economic survival for nations like us. We have to trade with our neighbors first." He imagines Pakistani cement factories being constructed to provide for India's huge infrastructure needs, Pakistani textile mills meeting Indian demand for blue jeans, Pakistani ports being used to relieve the congestion at Indian ones. For a country that spent most of its existence trying to show that it's the military equal of its neighbor, the agenda amounts to a remarkable recognition of the strides India has made in becoming a true world power.

...To his credit, Mr. Zardari's answer involves more than simply passing around the collection plate. When I ask whether he would consider a free-trade agreement with traditional archenemy India, Mr. Zardari responds with a string of welcome, perhaps even historic, surprises. "India has never been a threat to Pakistan," he says, adding that "I, for one, and our democratic government is not scared of Indian influence abroad." He speaks of the militant Islamic groups operating in Kashmir as "terrorists" -- former President Musharraf would more likely have called them "freedom fighters" -- and allows that he has no objection to the India-U.S. nuclear cooperation pact, so long as Pakistan is treated "at par." "Why would we begrudge the largest democracy in the world getting friendly with one of the oldest democracies in the world?"
More here.