Aggregate Effects of HIV/AIDS on Development

Raul Santaeulalia-Llopis, University of Pennsylvania

The demographic structure of the population and its evolution are key in the process of economic development. In this context, HIV/AIDS appears to be a major disruption that drastically alters population dynamics and composition through well-defined channels: 1) it raises (prominently) the death rates of prime-age individuals raising widowhood and orphanhood and shortening life expectancy; 2) it reduces fertility rates (and population growth); 3) it increases marital reshuffling (divorces go up); and 4) it dampens the productivity of the sick raising their consumption/income ratio (and hence the need of transfers for them). I calibrate a population projection matrix model that inherits the properties of the HIV/AIDS demography using the MDICP panel data set. I incorporate this HIV/AIDS population dynamics into an economic development theory that explains transitions from Malthusian-stagnant-growth regimes to modern-growth regimes in order to quantify the impact HIV/AIDS has on growth take-off dates and speed of economic transitions in Sub-Saharan countries.