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© 1993 International Bank for Reconstruction and Development / The World Bank

research-article

Modeling the Macroeconomic Effects of AIDS, with an Application to Tanzania

John T. Cuddington

John T. Cuddington is in the Department of Economics at Georgetown University. This article is a condensed version of Cuddington (1991a), which was prepared as a background paper for Tanzania: AIDS Assessment and Planning (World Bank 1992). The author thanks Mead Over, John Hancock, and the staff of the Population and Human Resources Division of the Southern Africa Department at the World Bank for extensive comments and suggestions.

A Solow-style model is developed to study the effects of the AIDS epidemic on the growth path of the economy and GDP per capita. The model uses conjectures about the demographic effects of AIDS in Tanzania to estimate the macroeconomic effects on the economy. The findings suggest that, without decisive policy action, AIDS may reduce Tanzanian GDP in the year 2010 by 15 to 25 percent in relation to a counterfactual no-AIDS scenario. Per capita income levels are expected to fall by 0 to 10 percent by 2010.


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