This paper studies the impact of HIV/AIDS on per capita income and education. It ex-plores two channels from HIV/AIDS to income that have not been sufficiently stressed bythe literature: the reduction of the incentives to study due to shorter expected longevity andthe reduction of productivity of experienced workers. In the model individuals live for threeperiods, may get infected in the second period and with some probability die of Aids beforereaching the third period of their life. Parents care for the welfare of the future generationsso that they will maximize lifetime utility of their dynasty. The simulations predict that themost affected countries in Sub-Saharan Africa will be in the future, on average, thirty percentpoorer than they would be without AIDS. Schooling will decline in some cases by forty percent.These gures are dramatically reduced with widespread medical treatment, as it increases thesurvival probability and productivity of infected individuals.
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