AIDS and Income Distribution in Africa. A Micro-simulation Study for Côte d'Ivoire

We try to link the distribution of the AIDS epidemic over an African population with the distribution of income. For this purpose, we develop a demo-economic micro-simulation model able to simulate over a fifteen years period the impact of AIDS on household and individual incomes. The model is implemented using a rich set of Ivorian surveys. The results reveal the complexity of the interaction between demographic behavior and the income generating process. The AIDS epidemic seems to hurt more the lower middle class of the Ivorian population, that is the richest of the poor, and confronts survivors of an affected household to downward, although moderate, transitions through the distribution of income. In the absence of other macro- economic impacts, the main effect of AIDS in Côte d'Ivoire is a shrinking of the size of the economy by around 6% after 15 years, leaving average income per capita, income inequality, and income poverty roughly unchanged. If now t he impact on private health expenditures was taken into account, then no doubt that AIDS would clearly increase consumption poverty and decrease welfare. Moreover, if the prospects and patterns of labor demand were significantly affected by AIDS, then agai n both the overall and micro- economic impacts of the epidemic would appear more dramatic. In any case, the annual cost of anti- retroviral treatment remains out of reach for almost all infected persons in Côte d'Ivoire.