Effects of the Human Immunodeficiency Virus (AIDS) epidemic on economic growth in Iran

Consensus in the international community has grown over the past two years that Human Immunodeficiency Virus (AIDS) poses a threat to development, security, and economic growth. This paper uses Vector Error Correction Model(VECM) and Johansen cointegration analysis to estimate the effects of HIV on economic growth in Iran from 1990-2009. The results show that there is a long run cointegrating relationship between GDP per capita, total HIV mortality rates and the age dependency ratio. Result showed that an increase of 1% in total HIV morality rates will result in 1.6% decrease in GDP. The results also indicate that 1% increase in the age dependency ratio leads to 0.9% decrease in GDP. The empirical estimations for Iran from 1990-2009 show the effects appear to be greater when HIV morality rates fall in the whole population. However, the old age dependency ratio also has an important influence on the relationship when HIV is measured in the population, although the effect of changes in age dependency on GDP is considerably less than that of HIV. Education is now directly involved in the long run relationship between GDP and HIV. In plain sight, HIV/AIDS impacts negatively economic growth by reducing the labor force and potential output, but the main issue is to find out to what extent and how to correct the problem in the least costly and most effective way.

AIDS, Economic Growth, Epidemy, Iran