Macroeconomic effects of the response to HIV: Defining the path to long run impact analysis

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Macroeconomic effects of the response to HIV
Defining the path to long run impact analysis

• XVII International AIDS Conference
• Mexico, 5 August 2008

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Aim of the study

• To provide an economic model to
• Analyse the long term economic impact of the
  scaling up of HIV programmes
• Identify economic factors that could enhance or
  limit its implementation

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• Two phases
• Preparation Phase (Oct 07 June 08)
• Model, variables, data
• Development phase (Sept 08 March 09)
• Definition and calibration of a long run
  endogenous growth model

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Background

• HIV crisis long wave event that superimposes on
  other long wave trends
• Endemic poverty
• Poor governance
• Health sector and other social sectors in crisis
• Increasing social cost of economic transition
  programmes

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Macroeconomic Models

• Previous models the impact of the epidemic
• Two conclusions from previous modelling
• More empirical evidence is needed
• Behavioural effects of individuals and HH
  affected by HIV
• Must be dynamic
• AIDS not a short-term shock but a cumulative shock

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New concerns

• The importance of human capital in determining
  HIV economic impact
• Households and individuals are at the centre of
  the HIV epidemic
• The source of human capital
• Savings and consumption (ordinary goods or health
  goods)
• Health status affects productivity and education
  attainment
• Poverty and vulnerability are at individual and
  HH level

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An augmented Solow-type model

• Real production model, oriented to long-run
  issues and endogenous mechanisms
• 1. Will not include exchange rate and monetary
  mechanisms
• Because Dutch disease effect unlikely to be
  generated by extra aid for HIV
• Most high infection countries limited aid
  dependence
• Where aid for HIV is high low aid dependence
  countries

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Augmented Solow model to include (cont.)

• 2. Dealing not only with health but with
  healthcare access and cons
• gt a multiple factor production function for
  health
• H H ( Gi , GH )
• Where
• Gi healthcare infrastructures and medical staff
  (health sector support)
• GH HIV-related medical goods (treatment and
  care)
• Cross elasticity can reflect health system
  absorption capacity
• 3. A human capital function determined by
  education and health status
• To emphasize the positive relation health and
  economic growth
• Translate the OVC component

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Augmented Solow model to include (cont.)

• 4. The economic outcome of prevention activities
• Challenges
• How to model the infections averted by prevention
  activities?
• How to estimate the economic returns of
  prevention activities ?
• Outcomes interact at different time periods
• Possibilities under discussion
• Might try to integrate an epidemiological model
  to estimate the impact of prevention on
  prevalence
• Coefficient could be built on cost effectiveness
  values from existing literature

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The response to HIV and economic growthshort
term horizon
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The response to HIV and economic growthmedium
term horizon
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The response to HIV and economic growthlong term
horizon
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Conclusion

• The new proposed model will
• Take into consideration the endogenous impact of
  the epidemic on the behaviour of individuals and
  HH
• Enable to translate the long term impact of
  different HIV programmes on these behaviours
• elasticity of GDP to alternative combinations of
  HIV activities
• Enable selection and analysis of economic added
  value of National HIV Programmes

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Thank you
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Macroeconomic effects of the response to HIV
Defining the path to long run impact analysis

• Contact person Erik Lamontagne
• lamontagnee_at_unaids.org

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Annexes

• Dutch Disease Effect and
• aid dependence

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Data

• The model will be calibrated for 5 -7 countries
• Using country specific data
• Parameter from the literature