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HIV/AIDS and the Accumulation and Utilization of Human Capital in Africa - Working Paper 2

Amar Hamoudi
January 2, 2002
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Education is among the most prominent of the great challenges of development. This paper outlines the likely effects of the AIDS pandemic in Africa on the continent's ability to produce education and use it effectively for growth and poverty reduction. Four channels are explored. First, a supply effect: The deaths of millions of adults, and among them hundreds of thousands of teachers, will bring an increase in Africa's already relatively high fiscal burden of teacher salaries or the need to reduce the educational requirements of teachers. If not for the epidemic, this effect would be akin to an effort to reduce class sizes by about 50 percent. Second, a demand effect: The foreshortening of time horizons will reduce the lifetime private returns to education, making investments of time and money in schooling appear less attractive. Using data from Demographic and Health Surveys conducted in Africa, we find that for every 10 years that life expectancy has increased in Africa, schooling attainment increased by some 0.3-0.6 years, other things equal. In countries at the vanguard of the epidemic, life expectancy has already declined by over 20 years. If the effect is symmetric, this erosion in life expectancy may be expected to reduce average schooling in young adults in a country like Botswana, Zimbabwe, or Uganda to 1-3 years from the current 2-4 years. Third, a factor productivity effect: In many countries the loss of a large share of the skilled work force may reduce the social returns to skill among educated people who survive, reducing the contribution of education to overall growth. To the extent that a "critical mass" of skilled workers is necessary in order for positive externalities associated with high levels of education to be realized, the epidemic will reverse the gradual accumulation of this critical mass in the hardest hit countries. And finally, a complementarity effect: The loss of physical capital assets may reduce the ability of skilled workers to contribute to overall economic production, to the extent that physical and human capital are complementary inputs. As the epidemic reduces domestic savings, as well as foreign investment, it will erode the physical capital stocks in the hardest hit countries. Insofar as this in turn reduces the skill premium, it will have a negative impact on both the rate of growth and social productivity of the human capital stock.

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