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THE GIFT OF THE DYING: THE TRAGEDY OF AIDS AND THE WELFARE OF FUTURE AFRICAN GENERATIONS

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THE GIFT OF THE DYING: THE TRAGEDY OF AIDS AND THE WELFARE OF FUTURE AFRICAN GENERATIONS By Alwyn Young Presenters: Marisha Tardif Levan Bzhalava – PowerPoint PPT presentation

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Title: THE GIFT OF THE DYING: THE TRAGEDY OF AIDS AND THE WELFARE OF FUTURE AFRICAN GENERATIONS


1
THE GIFT OF THE DYING THE TRAGEDY OF AIDS AND
THE WELFARE OF FUTURE AFRICAN GENERATIONS
  • By Alwyn Young
  • Presenters Marisha Tardif
  • Levan Bzhalava

2
World Situation About HIV/AIDS
3
Adults and children living with
HIV/AIDS Estimated at end of 2001
Source www.weforum.org/pdf/Initiatives/GHI_HIV_DC
SA_AppendixE.pdf
4
Estimated number of adults and children newly
infected with HIV during 2001
Source www.weforum.org/pdf/Initiatives/GHI_HIV_DC
SA_AppendixE.pdf
5
Estimated adult and child deaths from HIV/AIDS
during 2001
Source www.weforum.org/pdf/Initiatives/GHI_HIV_DC
SA_AppendixE.pdf
6
Cumulative number of children estimated to have
been orphaned by AIDS at age 14 or younger at the
end of 1999
Source www.weforum.org/pdf/Initiatives/GHI_HIV_DC
SA_AppendixE.pdf
7
South Africa
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BACKGROUNDER The effects of AIDS
  • HOUSEHOLD LEVEL-
  • The impacts of reduced income combined with the
    costs of taking care of an infected person.
  • Children may be forced to leave school in order
    to provide care or generate income.
  • Less money is available for consumption.
  • LABOUR MARKET
  • There is a reduction in productivity due to
    factors such as absenteeism and high turnover.
  • Change in labour force and labour participation.
  • Due to the high turnover rate, there are higher
    costs for companies due to training and
    recruitment costs.

11
BACKGROUNDER
  • CONSUMER MARKET
  • The absolute number of consumers will be reduced.
  • The structure of demand will also change.
  • GOVERNMENT LEVEL
  • Increased demand on government services and
    assistance.
  • Weakening institutional capacity.
  • The fiscal burden of the disease.
  • SOCIAL IMPACT
  • Increased demand for health care, and welfare
    services also suffer due to high demand.
  • Reduction in demand for education which leads to
    a less educated population. In short, lower
    investment in physical and human capital.

12
Model Becker and Solow
  • Household behavior in the Beckerian tradition
  • n - quantity of children
  • q - the "quality" of children (measured by their
    human capital)
  • lm, lf - Individual leisure
  • Cm material consumption

13
Model Becker and Solow
  • Household utility function
  • LM - Male Labor Supply
  • LF - Female Labor Supply
  • Household utility is given simply by total
    consumption expenditures minus the disutility of
    labor

14
Model Becker and Solow
  • If labor supply is of the isoelastic form
  • per capita utility is then given by
  • y - output per capita
  • s - savings rate
  • ?i - share of each factor in total income.

15
Model Becker and Solow
  • For constant savings rates and factor shares,
    this justifies the fixation on output per capita
    as a measure of welfare.
  • Following Solow - assume that the savings rate
    remains fixed by some combination of private and
    public sector behavior.

16
Data
  • 1995 - South African October Household Survey
    (OHS)
  • 1998 - Demographic and Health Survey (DHS)

17
Two-Step Estimation Process
  • Two step
  • Estimate incomes as a function of age, sex and
    education, and then use the predicted relative
    incomes by educational attainment as the
    independent variable in the household behavioral
    equations. (OHS)
  • 2. By exogenous variation in individual education
    levels the price elasticity in each demand
    equation is identified.

18
Regression
  1. Interval regression
  2. Poison model
  3. Ordered probit

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  • Female labor supply is more elastic than
    mens
  • Every 1 increase in wages, male labor supply
    rises .17 and female labor supply rises .44.

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23
Calibration
  • Evolution and behavioral impact of the AIDS
    epidemic.
  • Assume a Cobb-Douglas production function in
    capital and effective labor

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Simulation
  • The author uses a simulation to demonstrate what
    would happen when certain criteria are changed.
    He presents five different scenarios.
  • 1- HIV- most realistic scenario
  • 2-NO HIV- a situation without the HIV virus, so
    very unlikely
  • The next three scenarios are with HIV, however
    assume that improvements are possible.
  • 3-No Becker
  • 4-No Fertility
  • 5-Full Education

27
Explanation of Simulations
  • NO HIV- the path taken if the epidemic did not
    occur
  • HIV- the economy under the HIV epidemic
  • NO BECKER-the path taken with the epidemic, but
    with no endogenous response to changes in wages,
    i.e. all education, fertility and participation
    decisions by educational class kept at their
    values along the No HIV path.
  • NO FERTILITY- Same as the No Becker scenario, but
    with the added dimension that HIV does not have
    the negative effect on fertility estimated.
  • FULL EDUCATION- The HIV path, however without the
    assumption that childrens education is
    interrupted at the time of their parents death.

28
Explanation
  • NO HIV- the wage initially declines, as better
    educated young age groups pressure the ratio of
    capital to effective workers. Eventually it
    begins to climb, due to higher levels of
    education which in turn lead to lower fertility
    and consequently lower population growth. A rise
    in GDP per capita. Accumulation of labour and not
    of capital. Increases in educational attainment,
    especially for younger cohorts. This in turn
    leads to an increase of effective labour per
    capita. Lower fertility.
  • HIV- The pattern seen under the No HIV scenario
    is reversed. High mortality in the first decades
    of the 21st century cause the wage to go up, but
    it does not remain so- it comes back down as the
    epidemic subsides, and the labour force is
    allowed to regenerate itself. It takes 60 years
    for the wage to return to the path dictated by
    the No HIV scenario.

29
Explanation
  • NO BECKER- Fertility does not respond to the
    temporarily higher wages. This results in a steep
    decline in wages, which fall below the NO HIV
    path. Same happens with No Fertility, in which
    wages decline even lower. Neither participation,
    fertility or childrens education responds to the
    temporarily high wages. This means that output
    per capita rises by less during the wage boom and
    then falls well below the NO HIV path. This is
    caused by large portions of the population which
    remain uneducated.
  • NO FERT- Bleaker scenario. Reduced fertility and
    higher adult mortality cause the economy to
    suffer, even despite the wage boom. High
    fertility in an uneducated population.
  • FULL EDUCATION- The high wages which the epidemic
    managed to bring about sustain themselves on
    their own. These high wages, in turn, lead to
    lower fertility and better educated children.
    High wages and low fertility create higher output
    per capita

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Table III
  • FULL EDUCATION- 6.6 increase in living standards
    is possible.
  • HIV and NO BECKER- due to an early boom, there is
    a relative decline in GDP per capita. Also caused
    by a reduction in human capital. Still
    experience an increase, however, at 5.6 and 4.3
    respectively.
  • NO FERT- output per capita declines immediately,
    and there is no boom to invest in. 3 reduction
    in living standards.
  • He also notes that the HIV epidemic still allows
    the South African economy enough resources to not
    only care for victims of the epidemic, but also
    to have funds left over to allocate toward
    raising the standard of living of future
    generations.

33
  • The result of the simulation support the fifth
    scenario, or full education, with the highest
    percentage of lives, at 6.6, and the cost of
    each patient at 11,000. This is accompanied by
    higher living standards for patients.
  • The point of this simulation is to demonstrate
    through the introduction of certain variables,
    that AIDS is in fact a positive phenomenon for
    the African economy, based on a
    production-centered economy.
  •   The inescapable conclusion is that the HIV
    epidemic has produced an abrupt reduction in
    fertility, endowing future generations with
    greater material resources per capita. p.35

34
Recent empirical trends in the South African
economy
  • During the 1990s as the epidemic spread and
    entered the public consciousness, aggregate
    savings and capital formation have remained
    remarkably steady.
  • Rising parental mortality.
  • School enrollment rates for the youngest age
    groups have not fallen, while those of older
    teenagers have declined by only 5

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  • AIDS has a profound impact on workers and
    their families, enterprises and national
    economies.

39
Critique of the article
  • The authors simulation does not seem to take
    into consideration the factor of political
    changes and cultural and the evolution of social
    norms. The latter two are impossible to predict.
    These factors are difficult to simulate and
    quantify.
  • The paper is silent on possible relationships
    between decreased population and a potential
    shortage of labour skills, which is an important
    aspect in a modern economy.
  • The paper makes use of many statistical
    assumptions, and some of the statistical flaws of
    African nations makes it difficult to trust some
    equations in the paper. There is a strong need
    for reliable data. A bigger reliance of
    quantitative data rather than qualitative.
  • Population without AIDs 110 million. versus
    Population with AIDS 50 million. The cost to the
    economy of loosing 60 million people is enormous
    in a consumer-oriented society but not in a
    producing-oriented society. However, production
    costs may increase, which will have a negative
    impact on competitiveness and deter investment.
  • We must also know the effect on the total
    demography how are the age groups distributed?

40
Supplementary sources
  • Badcock-Walters, Peter and Franklin, Lucinda.
    Socio-Economic Impact of HIV/AIDS on KwaZulu
    Natal The Management Challenge. Health and
    Economics and HIV AIDS Research Division,
    University of Natal.
  • International Finance Corporation, World Bank
    Group. IFC Against AIDS Protecting People and
    Profitability. http//www.ifc.org/ifcagainstaids
  • George, Gavin. Macroeconomics HIV/AIDS in the
    South African Context. Health and Economics and
    HIV AIDS Research Division.
  • The DAIMLERCHRYSLER HIV/AIDS Program in South
    Africa. Dr Clifford Panter, Dr Andrea Knigge, Mr
    Mike Folan, DaimlerChrysler SA (Pty) Ltd, GTZ
    GmbH - Disease Control Health Promotion, The case
    study that refers to this document is available
    at www.weforum.org/globalhealth/cases
  • Dr Clifford Panter, Dr Andrea Knigge, Mr Mike
    Folan The DAIMLERCHRYSLER HIV/AIDS Program in
    South Africa www.weforum.org/pdf/Initiatives/GHI_
    HIV_DCSA_AppendixE.pdf
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