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Economics 172 Issues in African Economic Development

This lecture explores the issues surrounding the spread of HIV/AIDS in Africa, its impact on economic development, and the potential public policy responses to combat the epidemic. It discusses key questions in the study of HIV/AIDS and presents a simple model to analyze the decision-making process related to engaging in unsafe sex. The lecture also highlights the need for testing, condom distribution, public health campaigns, regulation of prostitution, subsidization of treatment, and the development of an HIV vaccine as possible policy interventions.

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Economics 172 Issues in African Economic Development

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  1. Economics 172Issues in African Economic Development Lecture 11 February 21, 2006

  2. Outline: • Why does HIV continue to spread? • What can public policy do about HIV/AIDS in Africa? Economics 172

  3. Key questions in the study of HIV/AIDS (0) Characterizing the extent of the problem (today) (1) What impact does HIV/AIDS have on economic development in Africa? (2) Why does HIV/AIDS continue to spread in Africa? (3) What can / should public policy do about HIV/AIDS? Economics 172

  4. Why does HIV continue to spread? • Lack of information, awareness about HIV/AIDS? • Probably not a good explanation anymore • What else? Economics 172

  5. Why does HIV spread? A simple model • Timing: two periods, Youth (t=1), Old age (t=2) • Key decision in Youth: Engage in unsafe sex or not Economics 172

  6. Why does HIV spread? A simple model • Timing: two periods, Youth (t=1), Old age (t=2) • Key decision in Youth: Engage in unsafe sex or not • Likelihood of living to Old age: • P  (0,1) if HIV- • PHIV (0,P) if HIV+ • Value of one period of life: V > 0 • Assume the agent is HIV- in her/his youth Economics 172

  7. Why does HIV spread? A simple model • “Rational” decision rule: engage in unsafe sex if the expected utility of unsafe is greater than of safe sex EU (Safe sex) = V + {PV + (1 – P)*0} = V(1+P) Economics 172

  8. Why does HIV spread? A simple model • “Rational” decision rule: engage in unsafe sex if the expected utility of unsafe is greater than of safe sex EU (Safe sex) = V + {PV + (1 – P)*0} = V(1+P) • Assume unsafe sex always lead people to be HIV+ EU (Unsafe sex) = {V+S} + {PHIVV + (1 – P)*0} = V(1+PHIV) + S Economics 172

  9. Why does HIV spread? A simple model • “Rational” decision rule: engage in unsafe sex if the expected utility of unsafe is greater than of safe sex EU (Safe sex) = V + {PV + (1 – P)*0} = V(1+P) • Assume unsafe sex always lead people to be HIV+ EU (Unsafe sex) = {V+S} + {PHIVV + (1 – P)*0} = V(1+PHIV) + S • EU (Unsafe sex) – EU (Safe sex) = S + V(PHIV – P) > 0 Economics 172

  10. Why does HIV spread? An extension • Imagine people do not know their infection status. S/he thinks she has likelihood R  [0,1] of already being HIV+ EU (Safe sex) = V + [RPHIV + (1 – R)P]V Economics 172

  11. Why does HIV spread? An extension • Imagine people do not know their infection status. S/he thinks she has likelihood R  [0,1] of already being HIV+ EU (Safe sex) = V + [RPHIV + (1 – R)P]V EU (Unsafe sex) = V(1+PHIV) + S (UNCHANGED) • EU (Unsafe sex) – EU (Safe sex) = S + (PHIV – P)(1 – R)V > 0 Economics 172

  12. What is this model missing? • People are altruistic - Allow the benefits of unsafe sex to be a function of R: S = S(R). This may offset the “nothing to lose” effect Economics 172

  13. What is this model missing? • People are altruistic - Allow the benefits of unsafe sex to be a function of R: S = S(R). This may offset the “nothing to lose” effect • Not all sexual choices are voluntary (e.g., rape) Economics 172

  14. What is this model missing? • People are altruistic - Allow the benefits of unsafe sex to be a function of R: S = S(R). This may offset the “nothing to lose” effect • Not all sexual choices are voluntary (e.g., rape) • Social / cultural norms regarding “acceptable” sexual behavior, especially regarding safe sex • Pockets of poor information about HIV/AIDS • Others? Economics 172

  15. Economics 172

  16. What can public policy do about HIV/AIDS? • Testing people, inform them of their HIV status Economics 172

  17. What can public policy do about HIV/AIDS? • Testing people, inform them of their HIV status • Condom distribution • Public health information campaigns (e.g., Uganda) • Regulate prostitution Economics 172

  18. What can public policy do about HIV/AIDS? • Testing people, inform them of their HIV status • Condom distribution • Public health information campaigns (e.g., Uganda) • Regulate prostitution • Subsidize treatment for anti-retroviral medical treatment (ARVs). (Compliance? Profits?) Economics 172

  19. What can public policy do about HIV/AIDS? • Testing people, inform them of their HIV status • Condom distribution • Public health information campaigns (e.g., Uganda) • Regulate prostitution • Subsidize treatment for anti-retroviral medical treatment (ARVs). (Compliance? Profits?) • Development of an HIV vaccine Economics 172

  20. Whiteboard #1 Economics 172

  21. Whiteboard #2 Economics 172

  22. Whiteboard #3 Economics 172

  23. Whiteboard #4 Economics 172

  24. Whiteboard #5 Economics 172

  25. Map of Africa Economics 172

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