Effects of the HIV/AIDS epidemic on economic Growth in Iran

Abstract Consensus in the international community has grown over the past two years that HIV/AIDS poses a threat to development, security, and economic growth. A few studies over the last ten years have looked at the impact on workers and their employers. With momentum building to prevent new infections and treat those already afflicted, more information is needed to assess economic impacts and cost efficacy of treatments. 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 a 1% increase in the age dependency ratio leads to a 0.9% decrease in GDP. In general, the outcome of HIV/AIDS has resulted in significant macroeconomic effects, such as a diminution of the monetary resources to promote output expansion as well as a contraction of the labor market due to premature death or disability. 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.