2 HIV / AIDS : The Impact on the Social Fabric and the Economy

In many countries, the HIV/AIDS epidemic has attained a scale at which the impact on the economy and, even more broadly, on societies, is both evident and very serious. Through its broad economic impact, HIV/AIDS thus becomes an issue for macroeconomic analysis, and policies to prevent the spread of the virus have direct implications for key economic indicators such as economic growth and income per capita,1 and for economic development more generally. However, because the impact is very uneven across individuals or households, an analysis that captures only the main aggregate economic variables would miss many of the microeconomic effects of HIV/AIDS on living standards, which also matter for public policy and which, in turn, affect the main aggregate economic variables, for example through the accumulation of physical and human capital. To start with the most obvious effect, increased mortality means that the economy is left with fewer workers, both in total and across different occupations and skill levels. As private employees and public servants fall ill and eventually die, the efficiency of production or administrative processes is diminished. On the consumer side, households can seldom fully compensate for the loss of a breadwinner; as a result, poverty rises and children’s access to education deteriorates. In the longer run