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The macroeconomic impacts of AIDS in Kenya estimating optimal reduction targets for the HIV/AIDS incidence rate

This paper develops a stochastic model of growth to address the question of how to target, over time, reductions in the HIV/AIDS incidence rate in order to maximize inter-temporal social welfare within affected economies. The model is applied to the case of Kenya. Our results show that even under co...

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Bibliographic Details
Published in:Journal of policy modeling 2002-05, Vol.24 (2), p.195-218
Main Authors: Robalino, David A., Voetberg, Albertus, Picazo, Oscar
Format: Article
Language:English
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Summary:This paper develops a stochastic model of growth to address the question of how to target, over time, reductions in the HIV/AIDS incidence rate in order to maximize inter-temporal social welfare within affected economies. The model is applied to the case of Kenya. Our results show that even under conservative estimates about potential benefits and pessimistic views about costs, Kenyan policy-makers should target sharp reductions in the short-run. These reductions approximate 20–50% of the current incidence rate. Our results also show that allowing the HIV/AIDS prevalence rate to grow without control would have serious macroeconomic impacts. Conservative estimates of GDP losses for the period 2000–2020 range between 20 and 30% (in present value). These losses occur not only as the labor force shrinks and labor productivity falls, but also because it becomes socially optimal to reduce the savings rate of the economy and slow-down the accumulation of capital.
ISSN:0161-8938
1873-8060
DOI:10.1016/S0161-8938(02)00097-2