Disaggregation Is Key: Using Alternative Growth Models to Evaluate the Impact of AIDS on Growth in Sub-Saharan Africa

As of 2009, the United Nations Programme on HIV/AIDS reported that 68% of the global AIDS population was living in sub-Saharan Africa. While AIDS is a global epidemic it is concentrated in this geographic region and it affects their economies to a larger scale. This paper hypothesizes that, as there is an increase in AIDS prevalence rates in a given country there will be a decrease in growth. Researchers often use the Solow model to estimate the relationship between AIDS and growth. However, this model has certain disadvantages because it is an aggregated model of the economy and it does not distinguish between workers of varying productivity. Instead this paper will focus on the multi-sector Harris-Todaro model that places workers in three possible groups: the urban formal sector, the urban informal sector and the rural sector. The urban formal sector is home to the most productive workers and studies suggest that urban HIV prevalence rates tend to be higher than rural prevalence rates. Therefore, this paper proposes that the Harris-Todaro model should be more able to predict the impact of AIDS on growth because it distinguishes between workers, versus the Solow model that traditionally underestimates the impact of AIDS on growth. By regressing both the models, this paper hopes to show that the AIDS coefficient associated Harris-Todaro model is more negative than the coefficient associated with the Solow model. While the Solow regression results do find that AIDS has a negative statistically significant impact on growth, the coefficient comparison between the models does not find that the Harris-Todaro AIDS coefficient is more negative