Modeling the Macroeconomic Impact of HIV/AIDS

The paper addresses the impact of HIV/AIDS on per capita output and income, with particular emphasis on the role of labor mobility between the formal and informal sectors, and the impact of the epidemic on investment decisions. The study finds that HIV/AIDS affects both the supply of labor and the demand for labor in the formal sector. Only if there is a significant rise in the capital-labor ratio, will there be an increase in formal sector employment. However, this is associated with a decline in the rate of return to capital. To the extent that companies respond to this by reducing investment, conventional models underestimate the adverse impact on employment, per capita output, and income. The analysis of the impact of HIV/AIDS on output is complemented by an assessment of the impact on income.Economic growth;Southern Africa;hiv/aids, hiv, aids, population growth, population growth rate, birth rates, hiv positive, health services, mortality rates, birth, aids economics, aids prevalence, particular country, medical services, hiv infection, mortality rate, infant mortality, sex workers, aids epidemic