1 Male Circumcision and AIDS: The Macroeconomic Impact of a Health Crisis

Theories abound on the potential macroeconomic impact of AIDS in Africa, yet there have been surprisingly few empirical studies to test the mixed theoretical predictions. In this paper, we examine the impact of the AIDS epidemic on African nations through 2005 using the male circumcision rate to identify plausibly exogenous variation in HIV prevalence. Medical researchers have found significant evidence that male circumcision can reduce the risk of contracting HIV. We find that national male circumcision rates for African countries are both a strong predictor of HIV/AIDS prevalence and uncorrelated with other determinants of economic outcomes. Two-stage least squares regressions do not support the hypotheses that AIDS has had any measurable impact on economic growth or savings in African nations. However we do find weak evidence that AIDS has lead to a decline in fertility combined with a slow-down in education gains, as measured by youth literacy, and a rise in poverty, as measured by malnutrition