Male Circumcision and AIDS: The Macroeconomic Impact of a Health Crisis
Executive Summary — The AIDS epidemic is a humanitarian disaster that has struck sub-Saharan Africa with particular severity, but its macroeconomic impact is much less certain. Though conflicting theories abound, empirically-based studies on the link between HIV prevalence rates and economic growth have shown no consensus. Given the significant medical evidence that male circumcision can reduce the risk of contracting HIV in Africa, tribal circumcision practices provide an "experimental" setting to test the impact of the AIDS epidemic on the overall economy. Key concepts include:
- AIDS has not had a measurable impact on key economic variables in Africa such as gross domestic product per capita, savings rates, and fertility.
- Youth literacy levels may have increased more slowly than they would have in the absence of AIDS, suggesting that HIV may decrease investment in education.
- The AIDS epidemic may have led to an increase in malnutrition, perhaps supporting the hypothesis that AIDS has contributed to the persistence of poverty in Africa.
- While the impact of the epidemic on growth has not been as large as the world feared, governments of high-AIDS countries need to establish educational and nutritional outreach.
Theories abound on the potential macroeconomic impact of AIDS in Africa, yet there have been surprisingly few empirical studies to test the mixed theoretical predictions. In this paper, we examine the impact of the AIDS epidemic on African nations through 2002 using the male circumcision rate to identify plausibly exogenous variation in HIV prevalence. Medical researchers have found significant evidence that male circumcision can reduce the risk of contracting HIV. We find that national male circumcision rates for African countries are both a strong predictor of HIV/AIDS prevalence and uncorrelated with other determinants of economic outcomes. Two-stage least squares regressions do not support the hypotheses that AIDS has had any measurable impact on economic growth, savings, or fertility behavior in African nations. However we do find weak evidence that AIDS has led to a slow-down in education gains, as measured by youth literacy, and a rise in poverty, as measured by malnutrition.