The Impact of HIV on Economic Growth in Sub-Saharan Africa: Evidence of Spatial Externalities

Abstract

In this paper I consider a spatial panel growth model which explicitly takes into account technological interdependence among countries. I investigate the hypothesis that HIV/AIDS epidemic slows down the pace of economic growth and that the epidemic causes spatial externalities among economies. I examine 39 Sub-Saharan African countries by using the empirical growth equation in a spatially augmented Solow model in which health capital serves as a determinant of human capital and including spatial externalities. The study covers the period 1990-2009 and I control for a variety of factors possibly correlated with HIV prevalence that might also influence economic growth. The results show that the epidemic has a significant negative effect on the growth rate of per capita GDP in the home country. Spatial externalities caused through the epidemic are found to be significantly positive.