HIV Breakthroughs and Risky Sexual Behavior

Recent breakthroughs in the treatment of HIV have coincided both with a dramatic reduction in HIV mortality, and with a disturbing increase in HIV infection rates. These apparently contradictory trends may be causally related, if treatment improves the health and functional status of HIV+ individuals and allows them to engage in more sexual risk-taking. Using state-level health insurance as an instrument for HIV treatment, we find that treatment causes HIV+ individuals to take 3.5 additional partners, and 1.9 additional new partners. We estimate that this may more than double the infection risk faced by HIV-negative persons. This has important welfare consequences: new treatments always benefit HIV+ individuals, but we show that they may actually lower lifetime utility for the uninfected. Economic theory suggests it might be efficient for the government to respond by boosting public spending on prevention to offset the increase in infection risk. For helpful comments and discussion, we are grateful to Partha Deb, Bob Kaestner, Jean-Jacques Laffont, Will Manning, Vazha Nadareishvili, as well as seminar participants at the 2004 NBER Summer Institute and the 2004 Annual Health Economics Conference at the University of Alabama-Birmingham. Abby Alpert provided exceptional research assistance.