An assessment of the impact of HIV/AIDS on economic growth in Zimbabwe

[1985-2009]

CHAPTER ONE

INTRODUCTION

1.0 Introduction
Economic growth reflects the increase in the production of goods and services over time
and often used as a measure of increased well being generated through economic activity.
Economic growth is driven by greater use of inputs (such as labour, capital and natural
resources) and/or growth in productivity. It is usually reported as a percentage increase in
Gross Domestic Product (GDP) for a country.

Human Immunodeficiency Virus/Acquired Immunodeficiency Syndrome (HIV/AIDS)

prevalence has become a major international concern, particularly in Africa where it has
taken a heavy toll. Africa has the highest number of new infections. Africa is home to
about 70% of the adults and 80% of the children living with HIV in the world. The
estimated number of newly infected adults and children in Africa reached 3.5 million at
the end of 2001. It has also been estimated that 28.5million adults and children were
living with HIV/AIDS in Africa by the end of 2001. AIDS deaths totaled 3 million

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globally in 2001, and of the global total 2.2 million AIDS deaths occurred in Africa
(UNAIDS 2002). HIV/AIDS’ social and economic consequences are felt widely not only
in health but in education, industry, agriculture, transport, human resources and the macro
economy at large.

In Zimbabwe HIV/AIDS epidemic is a health and development crisis. According to the

National AIDS Council of Zimbabwe [NACZ] (2005), in the year 2004 an estimated
24.6% of the adult population (ages 15-49) was infected by HIV/AIDS and this translates
to 1 610 000 people out of 11.6 million people infected by HIV/AIDS while an average of
3000 people per week die as a result of HIV/AIDS related illness making Zimbabwe one
of the most seriously affected countries in the entire world. HIV/AIDS destroys the
human capital (Bonnel, 2000). A healthy population is key to economic growth and
therefore economic development. Health has a positive and significant effect on economic
growth.

HIV/AIDS requires special attention because there is no cure for the disease at present
and it has a long incubation period thus the impact of the existing levels of infection will
be felt after a long time. The working age group is the most affected in Zimbabwe and
other developing countries. This has implications for production and the population age
structure. Also the number of infected persons is large and there are no indications of
reduced incidence to minimal/acceptable levels.

For these reasons HIV/AIDS has wide implications not only as a health problem but as a
socio-economic problem as well and all sectors ranging from subsistence farmers,
informal sector workers, top managers, professionals, civil servants and politicians.

1.1 Background of the study

HIV/AIDS has far reaching impacts on vulnerability to other diseases, the fiscal budget,
agriculture and food security, social structure and Gross Domestic Product of the country.
According to the Ministry of Health and Child Welfare (MOHCW) 2004, the incidence of
TB rose from 382 per 100 000 people in 1999 to 471 per 100 000 people in 2004. This
surge is attributed to increases in HIV infections. As of 2003, the costs of conventional

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care for HIV/AIDS related illness were estimated to increase the MOHCW budget by
80%. This and increased morbidity and mortality have direct implications on the
macroeconomic performance of the Zimbabwean economy.

The number of HIV/AIDS cases has been increasing at a dramatic rate. The National HIV
estimates (2005) reports that the number of HIV infected persons rose from 390 000 in
1998 to 1189279 in the year 2009. Figure 1 below shows the trends in HIV prevalence
since 1988.

Fig 1: Trends in estimated HIV prevalence in Zimbabwe (1988-2009)

Source: Ministry of Health and Child Welfare

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The number of annual AIDS cases also rose from 16 000 in 1988 to 119692 in 2006 and
declined dramatically to 83936 in 2009. The HIV/AIDS prevalence rate was 13.63% in
2010 and the projected prevalence rate for 2011 is expected to fall to 13.13%, NACZ
(2010). According to the MOHCW projections, HIV/AIDS prevalence rates will continue
to increase with roughly 490 people being expected to develop AIDS everyday between
2003 and 2018.

HIV/AIDS has become the major cause of mortality in Zimbabwe. According to the
NACZ (2004), by the end of 2003, 1.5 million Zimbabweans had died of AIDS and 2.7
million more are likely to die from the disease by 2018 in the absence of widespread use
of anti-retroviral drugs. Even if HIV incidence were to fall to zero by 2010, there will still
be an additional 1.6 million AIDS deaths between 2003 and 2018. Annual AIDS deaths
rose from 12 000 in 1988 to 250 000 in 2005. This translates to an over 14-fold increase
in HIV and AIDS related deaths.

Fig 2: Number of Annual AIDS Deaths Estimates (1988-2009)

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Source: National HIV estimates (2005)
In figure 2 above, the statistics confirm that HIV/AIDS is indeed a serious health problem
whose impact is not limited to the health sector alone but has economy-wide implications.
This gap can be reduced too if HIV/AIDS is controlled. Nevertheless the crude death rate
of around 35 deaths per 1000 in 2010 under the AIDS controlled scenario is still very
high as such as HIV and AIDS still remains a major threat to mankind.

It has been generally noted that costs of the impact of HIV/AIDS on communities is both
direct and indirect on the micro and macro level. On the macro level direct costs relating
to treatment and prevention costs associated with HIV/AIDS related illness, have serious
implications for health care budgets nationally and even around the region. The
macroeconomic impact of increases in these costs work through two channels; increased
government expenditure on health which may lead to an overall increase in the
government expenditure without a matching increase in its revenues. The budget deficits
that may arise have implications on macroeconomic variables such as money supply
growth, interest rates and prices depending on how the deficit is financed. Total
government expenditure might not increase but there would be a switching of expenditure
from capital formation to the health care, which is a recurrent expenditure. If expenditure
patterns change towards recurrent expenditure rather than capital formation, it implies a
reduction in future investments and hence economic growth would be thwarted.

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According to the MOHCW (2004), for expenditure specifically targeting HIV/AIDS,
although nominal expenditure has been increasing since year 2000, no discernable
increase in real terms is apparent. The most prominent change occurred in 2003 when a
budgetary allocation for Anti Retro-Virals was made. However, in real terms these
expenditures show a marked decline. This may not reflect less attention on HIV/AIDS;
rather it may reflect the dwindling size of the national cake over the years. IMF studies
estimates that with the effect of the pandemic becoming ever more pronounced in the next
10 to 15 years, the costs of prevention and clinical treatment will increase up to 0.3% and
1.1% of GDP respectively. Following earlier World Bank studies, which estimated that,
after accounting for the expensive treatment apparatus, training costs of personnel and
related infrastructure, the annual -per patient cost of ARV therapy could be as high as
US$2 000 plus US$400 for prevention and treatment of opportunistic infections and
palliative care, Haacker (2002) estimated that even with limited coverage rates (30%
palliative care/sedative, 20% for clinical treatment, 10% for ARV) total HIV related
health care costs of governments could increase to 3.5% of GDP by 2010 compared to
2.1% of 2000.

1.2 Statement of the Problem

HIV/AIDS has reversed development gains profoundly in Zimbabwe causing changes
that will have critical long-term impacts on economic growth for decades to come.
HIV/AIDS has a great impact on development because it affects primarily the production
age range in the population. Where the epidemic is most serious, it affects productivity
and production and household community, sectorial and national economic security.
Many development priorities become increasingly unattainable as the epidemic worsens
economic performance and undermines the national capacity to respond not only to the
epidemic, but also to other developmental priorities. One obvious consequence of HIV
and AIDS is the contraction of the contribution base. By causing shrinkage in the number
of employed persons and by weakening the income generating system, the inflows to the
social security system will necessarily decline.

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1.3 Objectives of the study
While AIDS is not primarily an economic issue the epidemic has attained a scale that
makes it one of the factors affecting economic growth. The study is therefore aimed at;

 Making a contribution towards establishing the impact and magnitude of HIV and
AIDS on the macro economy.
 Contribute towards establishing policy measures to reduce HIV/AIDS.

1.4 Significance of the study

A few studies over the past twenty years have looked at the impact of HIV/AIDS on
workers and their employers, with momentum building to prevent new infections and
treat those already infected, more information is needed to access economic impact and
cost efficacy of treatment. Although there is general consensus that HIV/AIDS poses
severe macroeconomic implications, less empirical effort has been directed at quantifying
or measuring the magnitude of this impact. This study is therefore aimed at making
contributions towards establishing the magnitude of HIV/AIDS macroeconomic impact
on Zimbabwe. Studies on the measurement of the economic costs of HIV/AIDS adopt
two approaches, either the direct approach focusing on the cost of prevention and
treatment of HIV/AIDS or an indirect cost approach that measures the value of
production lost as a result of HIV/AIDS related morbidity, mortality and resource
allocation implications of coping measures adopted at the national levels. This study will
bring to light the impact of HIV and AIDS prevalence on economic growth. The study
will also provide valuable information for policy makers on how to reduce this epidemic.

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1.5 Research Hypothesis
H0: AIDS has a negative impact on human capital and in turn negatively affects
economic growth.

1.6 Organisation of the rest of the paper

The remaining four chapters are structured as follows:

Chapter Two consists of literature review, which includes the theoretical and the
empirical review of the research problem.

Chapter Three will contain the methodology of the study and the model to be estimated is
to be specified in this chapter and the variables to be used in the model are justified.
Chapter Four is the presentation and interpretation of the results. Chapter five focuses on
the conclusions and recommendations.

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 CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction
This chapter examines the major theories of human capital and economic growth. It is
divided into two sections, first the theoretical review, which looks at the human capital,
by various authors and then the empirical review.

2.1 THEORETICAL REVIEW

Grossman Model (1999)

Grossman (1999) labelled the demand for health as the human capital model in much of
the literature on health economics because it draws heavily on ‘human capital theory
[Becker (1964, 1967), Ben-Porath (1967), Mincer (1974)]. According to human capital
theory, increase in a person’s stock of knowledge or human capital raises his productivity
in the two market sector of the economy, where he produces money earnings, and in the
non-market or household sector, where one produces commodities that enter one’s utility
function.

To realise potential gains in productivity, individuals have an incentive to invest in formal

schooling and on-the-job training. Grossman (1999) argues that health capital differs from
other forms of human capital. In particular he argued that a person’s stock of knowledge
affects his market and non-market productivity, while his stock of health determines the
total amount of time he can spend producing money earnings and commodities. These
commodities are Bentham’s (1931) three pleasures that exhaust the basic arguments in the

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utility function. Consumers produce commodities with inputs of market goods and
services and their own time. For example, they use sporting equipment and their own time
to produce recreation, travelling time and transportation services to produce visits, and
part of their Sundays and church services to produce “peace of mind”. The concept of a
household production function is perfectly analogous to a firm production function. Each
relates a specific output or a vector of outputs to a set of inputs. Since goods and services
are inputs into the production of commodities, the demand for these goods and services is
a derived demand for a factor of production. In other words, the demand for medical care
and other health inputs is derived from the basic demand for health.

There is an important link between the household production theory of consumer

behaviour and the theory of investment in human capital. Consumers as investors in their
human capital, produce these investments with inputs of their own time, books, teachers’
services, and computers. Thus some of the outputs of household production directly enter
the utility function, while other outputs determine earnings or wealth in a life cycle
context. Health, on the other hand does both.

In Grossman’s model, health defined broadly to include longevity and illness free days in
a given year is both demanded and produced by consumers. Health is a choice variable
because it is a source of utility (satisfaction) and because it determines income or wealth
levels. In other words consumers for two reasons demand health; as a consumption
commodity, it directly enters their preference functions, or put differently, sick days are a
source of disutility. As an investment commodity, it determines the total amount of time
available for market and activities. In other words, an increase in the stock of health
reduces the amount of time list from these activities, and the monetary value of this
reduction is an index of the return four to an investment in health. Since health capital is
one component of human capital, a person inherits an initial stock of health that
depreciates with age at an increasing by investment. Death occurs when the stock falls
below a certain level, and one of the novel features of the model is that individuals
“choose” their length of life.

Gross investments are produced by household production functions that relate an output
health to such choice variables or health inputs as medical care utilization, diet, exercise,

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cigarette smoking and alcohol consumption. In addition, the production function is
affected by the efficiency or productivity of a given consumers as reflected by his or her
personal characteristic. Efficiency is defined as the amount of heath obtained from a
given amount of health inputs. For example, years of formal schooling completed plays
an important role in this context.

Since the most fundamental law in economics is the law of the downward sloping demand
function, the quantity of health demanded should be negatively correlated with its”
shadow price”. The author also shows that the shadow price of health rises with age if the
rate of depreciation on the stock of health rises over the lifecycle and falls with education
(years of formal schooling completed), if more educated people are more efficient
producers of health, under certain conditions, an increase in the shadow price may
simultaneously reduce the quantity of health demanded and increase the quantities of
health inputs demanded.

Grossman in his monograph on the demand for health argues “a production function
taken by it tells nothing about producer or consumer behaviour, although it does have
implications for behaviour, which operate on the demand curves for health and medical
care. Thus, they serve to rationalise the forces at work in the reduced form and give the
variables that enter the equations economic significance. Because the reduced form
parameters can be used to explain consumer choices and because they can be obtained by
conventional statistical techniques, their interpretation should be pushed as far as
possible.

Olukoga (2005)

Olukoga (2005) state that health sector reform can be defined as the multidimensional,
fundamental sustained and purposeful institutional changes geared towards the
achievement of defined health policy objectives. Olukoga talks of how the sector reform
is to improve the health status of the citizenry. For the economic factors, he discusses
how economic recession results in drastic reduction in health care budgets, scarce
financial resource in the rising costs of health care budgets, scarce financial resources in
the rising costs of health care also provides a rationale for health sector reform in many

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developing countries. He states that there is a link between capacity and performance.
Hence capacity plays a prominent role in the health sector in ensuring the achievement of
health goals and objectives. The ministries of health agencies in many developing
countries lack the skills and capacities necessary for their key functions. These include
capacities for policy analysis and development, strategic management, program
implementation and regulation. Many countries worldwide are embarking on health
sector reform programs in order to achieve a better quality of life for their citizens.
HIV/AIDS has once again risen in the vexing question of; how does a nation protect its
most economically vulnerable members at those times when the nation is vulnerable. He
also suggests that economies are perhaps as the weakest members and as such, highlights
the need for responsible governments to consistently target the most vulnerable members
with the expressed aim of improving their standard of living.

Loewenson and Whiteside (1997)

Loewenson and Whiteside (1997), indicate that there are certain complications on the part
of government and external agencies in accepting the reinforcing the presumption that
illness (including HIV/AIDS) is private misfortune, the consequence of which are
essentially the responsibilities of households for where state welfare provision is minimal
and the capacity of government limited, the role of the household in dealing with illness
and death becomes critical by default. Loewenson and Whiteside indicate that it is not
just that the role of household is taken for granted; there is a tendency for it to be further
elaborated, with households being urged to increase their capacity. So strong is the
emphasis on coping that pressure is exerted on even those most afflicted to struggle to
maintain the semblance of household integrity. But AIDS renders some household unable
to sustain themselves. Of special importance is the way AIDS undermines and removes
labour resources of young adults in the prime of their productive years. This of itself
makes the impact of AIDS different from that of other long-term illness, as well as from
drought or climatic traumas. Moreover, the clustering of AIDS within households, a
consequence of both conjugal and mother to child transmission, exerts an insidious,
cumulative impact, affecting the composition of households in a way, which may not be

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easily repairable. In addition, the impact of AIDS is profoundly gendered in a manner,
which serves to deepen its consequence.

HIV/AIDS epidemic affects the dynamics of some variables. First it affects labour
productivity due to the increase in disability, the premature death of workers, which
reduces the accumulated level of knowledge/experience of labour force, and this
introduces distortions in mobilising resources to treat AIDS or prevent HIV. Second,
given that disease is fatal, the epidemic reduces the size of the labour force, thus,
increasing the stock of capital per worker.

Conclusion on theoretical review

HIV/AIDS also have a negative impact on the education are falling thereby decreasing
Zimbabwe’s capital as well as its ability to accumulate human capital. According to
MOCHW (2003), the population growth rate has decreased (to about 2,6%) and school
enrolments have declined, the latter reflecting the fact that family networks are
weakening owing to parental deaths increasing number of orphans having to drop out of
schools to provide for themselves and their siblings. (It has been estimated that by the end
of the year 2005 there will be 1 140 000 in Zimbabwe) according to the National AIDS
Council Survey of 2003.The increased mortality of teachers and administrators in the
education system correspondingly affects supply. Moreover, the net cost of training future
skilled professional increases, because lower life expectancy of death implies a lower
average return to investment in education, if this induces lower investment in human
capital accumulation. This will adversely affect future production.

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 Fig 3: HIV/AIDS and the economic system

Required Health
Expenditure
Private Expenditure Government Actual Health
Expenditure Expenditure

Supply of GDP Savings/Capital

Labour

Illness or HIV/AIDS Prevention and

Death Treatment

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Source: Adapted from de Janvry and Sadoulet, 1995.

The productivity of workers does have an influence on economic growth, the quantity
and quality of labour employed determines how much can be produced at a certain
period. AIDS makes the quality of the labour force to be poor and more many hours
would be lost as replacement has to be found of those who might probably be on sick
leave, died of the disease and the rate of absenteeism. Changes in productivity would also
result in changes in economic growth. To firms the major are incurred on lost production
as a result of deaths and absenteeism. However as pandemic grows, training or
recruitment cost will begin to claim a major share as a result of the ensuring high labour
turnover. The direct impact on the stock of human capital for such a small economy as
Zimbabwe is larger, thus reducing the supply of skilled labour thereby lowering the
marginal productivity of all factors of production which imply a decrease in the rate of
investment, (Matshe 2003).

New Growth Theory (1986)

It was also called the endogenous growth theory articulated by Roamer (1986).the model
moves away from the neo classical model and explores alternate channels through which
investment affects growth. This school attaches greater significance to certain types of
investments that creates externalities and generates an additional productivity boost
through production spill overs or the associated diffusion of technology (Stiroh 2000).
Models that both allow continuous growth and determine its level are said to have
endogenous growth.

Roamer (1986) provided a model that yielded positive, long run growth rates without
assuming exogenous technical change instead. Roamer modelled technology growth (he
termed it “knowledge” growth) as the outcome of competitive firms that invested in
knowledge generation. The central idea that allowed this was that while individual firms
face diminishing returns to investing in knowledge, at the societal returns to knowledge
can be increasing. Arrow (1962) assumes that the stock of knowledge (A) is a function of
the entire capital (i.e. A=Kф) consider the aggregate production function,

Y=Kα (AL) β=Kα ([Kф] L) β=Kα+фβ.Lβ ……………………………. (1)

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If α+βф=1, which implies ф=1 the economy wide marginal product of capital will be
constant, implying the incentive to accumulate capital may always be present. Note also
that the production function in equation (1) exhibits increasing returns to scale (if ф>0)
individual firms, however, still view their own production function as having constant
returns and diminishing returns to capital. The fact that knowledge can spill over (i.e.
positive externalities) is at the centre of the growth process. Roamer (1986) develops
these ideas into a competitive equilibrium model which yields long run positive growth.

The model also suggests that the competitive growth rate is below the socially optimal
level (due to the presence of knowledge externalities). Large countries may grow faster (a
scale effect), and shocks to a country’s growth may have permanent effects.

The new growth theory thus moves beyond the neo-classical theory arguing that
economic growth can continue indefinitely without technical progress. In this case the
theory focuses on stock of knowledge as a function of the entire capital stock, leads to
parallel improvements in economic growth that is capital accumulation causes economic
growth.

2.2 Empirical Review

There are several studies that tried to address the link between HIV/AIDS and economic
growth in early 1990s (for example, Over (1992) Cuddington (1993), Cuddington and
Hancock (1995). These papers conclude that the impact of HIV/AIDS on per-capita
income is rather very small and as the fault scale of the epidemic had not been recognised
at the time, there has been little research on these issues over proceeding years.

Of the early researches, over (1992) uses a two–sector framework (urban/rural) with
Cobb-Douglas production function. Rural production draws on land, unschooled labour
and primary school educated labour. Barn production draws on capital, primary and
secondary educated labour. Key determinants of the impact of the epidemic are the effect
on savings and the distribution of infection rate across skill classes. If for example AIDS
cases are distributed evenly across scale classes and 50% of the cost treatments are
financed from savings, annual GDP growth will decline about 1% for the ten countries

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with the most advanced epidemic (with prevalence rate assumed to arise to around 20%)
between 1990 and 2025 and the growth rate of GDP per-capital will decline by 30%.

Robalino et al (2002) did a research on the macroeconomic impacts of AIDS in Kenya

estimating optimal reduction targets for HIV/AIDS incidence rate. This paper developed a
stochastic model of growth to address the question of how to target, over time reductions
in the HIV/AIDS incidence rate in order to maximise inter-temporal social welfare within
affected economies.

The model applied in this case estimated that in year 2015,GPD could be 14,5% lower
than in a baseline scenario without AIDS, given that 80% of HIV infections occur in the
economically active population. They also predicted that income per capital in year 2015
would drop by 10%. More recently Bollinger et al (2002) estimated impacts on household
income. It expected for example that households in rural areas, which extract most of
their income from working in the small farms, would see their income reduced by 58-
78%. The results have also shown that letting the HIV/AIDS prevalence rate grow
without control would have macroeconomic impacts that are non-negligible. Hence the
present value of GDP during the period 2000-2020 is estimated to contract by 20 to 30%.
This occurs not only as the labour force shrinks and labour productivity falls, but also
because it becomes socially optimal to reduce the savings rate of economy and thus slow
down the accumulation of capital used. From the findings results in this case suggest that
one percentage point increase in the HIV/AIDS prevalence rate could be associated with a
2.8 to 4% reduction in labour productivity. This would translate into a 0.8 to 1.5%
reduction in economic growth.

Cuddington and Hancock (1995) in a study in Malawi analysed the impact of HIV/AIDS
in a dualistic economy. Thus under employed workers from the informal sector could
replace workers in the formal sector who died from AIDS. Human capital approach is the
most appropriate in trying to measure the direct loss in output as result of HIV/AIDS. The
productivity of workers with AIDS is reduced by half. For a scenario with AIDS
prevalence rising to 1,1% by 2010 (corresponding to an HIV prevalence rate of about
11%) and 50% of AIDS cost met by the reduced savings, the growth of GDP would fall
by 0.2%, and the level of GDP per capita would fall by about 1% by 2010.

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Lewis (2001) report projection of the impact of HIV and AIDS in South Africa based on
14 sectors Computable General Equilibrium (CGE) model. HIV and AIDS affect labour
productivity and total productivity, households spending patterns and government
spending. The model used, analysed the impact of reduced labour supply due to HIV and
AIDS on macroeconomic variables like prices and GDP growth rate, their effect on
demand and resource allocation. This is typical of an analysis which can only be carried
out in a CGE framework because the direct impact of reduced labour supply due to AIDS
is difficult to measure in the presence of not only high unemployment that characterises
the Zimbabwean economy but the effect of such a reduction on the multi-sectorial
interactions and their adjustment process. This study projected that the level of GDP per
capita will fall by 13% (relative to a scenario with no AIDS). Of the 13% in the level of
GDP (8%), about 2.7% are attributed to a decline in total factor productivity, and about
3.6% to decline in national savings.

A survey by Ojo and Delaney (1997) on the economic and demographic consequences of
AIDS in Namibia showed that of all the countries currently experiencing the HIV and
AIDS pandemic, Namibia is one of the most severely affected. The study’s conclusions
are based on projections calculated by two computer models, that is DEMPROJ
(Demographic Projections) and AIM (AIDS Impact Model). An aggregate production
function was employed as a convenient tool for exploring the effect on economic growth
of mortality reduction. The age distribution of HIV infection is assumed to remain
constant through 1998. The value of GDP per capita used is N$4 612 (base year 1990)
which is multiplied in the subsequent year by a real annual growth factor of 3% and
discounted at a real annual interest rate of 10%.

In a similar study, the Bureau for Economic Research (Southern Africa) estimate that
between 2002 and 2015, real GDP growth for South Africa will rise by 0.7% to 1.0%
reflecting a decline in GDP growth of between 0.3% and 0.6% while the rate of
population growth is projected to a decline by 1.3%. However, the modest decline in
GDP growth corresponds to an increase in the capacity utilisation, a shift of about 5% of
the labour force into the formal sector. Thus, potential GDP growth declines by 1.4% and
1.8% and the projected gains in GDP would eventually be reversed.

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Matshe et al (2006) indicated how the prevalence of the disease is not only a health
problem but has become an economic problem. The study uses a human capital approach,
which measures the value of production, lost as a result of HIV and AIDS related
morbidity and mortality and values an infected person’s return to society using an
individual’s annual income. The study establishes that HIV and AIDS have resulted in
significant output loss. The macroeconomic impact of HIV and AIDS is severe and can
therefore not be ignored given that it shall be felt for a long time to come even if
incidence drops to zero in the present period. The study also suggested that HIV/AIDS is
the leading cause of morbidity and mortality in Zimbabwe. This has wide implications on
the economy as it affects the economy’s capacity to accumulate human capital stock,
diminishes labour supply as well as labour productivity. In their study they obtained
results using a human capital approach, which show that HIV and AIDS led to decline of
13.32% of 1993’s GDP. This impact is significant and severe, given that the effect of HIV
and AIDS on the economy shall continue to be felt in many more years to come even if
incidence fall to zero today.

2.3 Conclusion
From this chapter it is noticed that theory says that there is an inverse relationship
between HIV/AIDS and economic growth. Human capital investment is the key to
economic growth since the contribution base will get wider with the stock of health.

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 CHAPTER THREE

RESEARCH METHODOLOGY

3.0 Introduction
This chapter seeks to outline, specify and develop the empirical model, which the
researcher will use in the study. It also explains and justifies the variables that are to be
used. An econometric model will be developed. The model seeks to show the relationship
that exists between economic growth and HIV/AIDS, that is, how HIV/AIDS impact on
the growth of the economy. Although much emphasis would be on the economic impact
of the deadly disease HIV/AIDS, the model also incorporates or exposes the extent to
which other variables impact on economic growth. This chapter will not only focus on the
model specification but also on data sources that were used, the computer package, the
estimation technique and size of the sample of the data.

3.1 Model Specification

The main aim of this study is to examine the impact of AIDS on economic growth during
the period 1985-2005. Change on GDP is used as a proxy for economic growth. Other
macroeconomic indicators like savings and private investment are also included. The
model also used the error term to capture other variables that impact on economic growth
that are not captured by the empirical research model. After going through the empirical
and literature review, the researcher came up with an econometric model. The researcher
thus used the model that was used in Kenya by Robalino et al (2002). The model is as
stated below

GDP=f (LF, PR, GNS, PI)

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Where

GDP = change in GDP

LF = change in the labour force

PR = change in AIDS prevalence rate

PI = change in investment

GNS = change in savings

The model is in linear form and is given below

GDP= α+β0LF+β1PR+β2GNS+β3PI+μ

The βs are the estimation parameters and μ is the error or stochastic term, which capture
all other variables that are not included in the model. The model is linear in parameters.

3.2 Estimation Procedures

The researcher is firstly going to use the Dickey-Fuller unit root test to test for the
stationarity of the variables. If the absolute value of ρ is greater than one (ρ>1), the series
is explosive. The hypothesis of a stationary series can be evaluated by testing whether the
absolute value of ρ is strictly less than one. The null hypothesis states that H 0: ρ=1. Since
the explosive series does not make much economic sense thus null hypothesis is tested
against one-sided alternative H1: ρ<1. Mackinnon critical values reported by E-views will
be used for the unit root test since a unit root test under the null hypothesis does not have
conventional t-distribution.

If the hypothesis is rejected then that will mean the variables will be stationary in their
own level, that is, I (0). If the null hypothesis is accepted then the researcher will
conclude that the time series is non-stationary in its own level. If variables are stationary
on different levels then the researcher will run a regression on the variable but that will
mean there is no long-term relationship between the variables because they will be
integrated of different orders.

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Auto-correlation is a special case of correlation, which refers to the relation between two
or more different variables but between successive values of the variables. To test for
auto-correlation the researcher will use the Durbin Watson test. If the DW statistic falls
within the range du and 4-du, then the researcher can conclude that there is no auto-
correlation. If the DW statistic is between 0 to d l and 4-dl to 4 the researcher can conclude
that there is positive and negative auto-correlation respectively. If the DW statistic is
between dl to du and 4-du to 4-dl, it is zone of indecision and no decision can be made
about auto-correlation of the variables.

A simple rule of thumb can also be used which says that if the DW statistic is very close
to 2 (two) then there is no auto-correlation between the variables. A computer package
called E-views will be used to make the estimations. This package will be employed as it
is easy to use and descriptive statistics are easily computed.

The method of estimation, which is used in this research, is the Ordinary Least Squares
(OLS). This criterion is justified because it fulfils the criterion that is used to measure the
goodness of fit of any estimator. As the model uses a linear relationship between the
variables, OLS is the best estimator for this research model because OLS estimators
minimises the sum of squared residuals.

3.3 JUSTIFICATION OF VARIABLES

Independent variables

Prevalence rate (PR)

HIV prevalence rate are associated with high incidence of HIV and AIDS. The rate at
which people acquire AIDS and the number of those who have it can have an impact on
the Gross Domestic Product (GDP), the higher the prevalence rate the lower the GDP.
Those affected and infected would need money to finance AIDS related costs and the
government would increase its expenditure on health. The increase in HIV prevalence

xxii
rate thus would lead to a decrease in GDP. There is a negative relationship between
prevalence rate and economic growth.

Change in the labour force (LF)

The change in the labour force implies that the GDP is bound to fluctuate. If the existing
pool of labour is reduced incapacitating both skilled and unskilled labour, GDP is likely
to be affected greatly. Increased turnover rates results in low productivity, as new staff
will be recruited time and again replacing those that are better skilled. Associated with
high turnover rate are increased training costs for new recruitments made when replacing
an experienced worker who falls victim. These costs can be very substantial and become
a prevalent feature on most companies’ expenses.

Savings (GNS)

In an economy where feedback effects are common between different levels of economic
activity, it is common that the first port of call of finance for households is their savings.
Primary need would necessitate recourse to financial savings before other forms of
savings. If there are low savings in an economy this will eventually result in low GDP.
However if households devote more of their income to savings thus increasing the
average propensity to save and hence contributing to an increase in the total private
savings, it means that the economy is likely to experience a positive GDP.

Investment (PI)

The investment variable also has a positive relationship with GDP. If there is more
investments it means that there is going to be more employment opportunities created
with overall output also increasing, this means that the Gross Domestic Product will be
increased thus leading to economic growth. This means things like infrastructure,
telecommunications and other public facilities will be developed as investment
opportunities expand. This improvement in infrastructure will mean further economic
growth.

xxiii
3.4 Data Choices

Secondary data sources have been made use of, because secondary data pose the
following advantages, it is useful to improve the credibility of the research finding of the
study because there would be a number of studies in its support. Secondary data can yield
more accurate data compared to primary sources, because population data collected by
the government, for example, is likely to yield accurate results than individual researchers
on surveys based on relatively small samples. It can be sufficient to solve the data needs
of the research hence no need to collect data. Thus costs are substantially low in that time
and financial resources are saved.

However secondary data does have its own disadvantages. Secondary information is
available in abundance hence the need to be careful when selecting relevant information
that answers the research problem.

3.5 Data Sources

Government institutions were relied upon as the producers of secondary data. HIV
prevalence rates were obtained from the Ministry of Health and Child Welfare, UNAIDS
publications and the statistical digest from the Zimbabwe National Statistics Agency.
GDP values and investment data were obtained from National Statistics Agency (National
Accounts). Savings figures were obtained from the Reserve Bank of Zimbabwe (RBZ)
Data used in the study is tabulated in Appendix I.

3.6 Limitation of Estimation Technique

OLS is believed to be biased in small samples. This assumption is not backed by
empirical evidence as all estimators are biased when it comes to small samples.

3.7 Conclusion
This chapter looked at the theoretical and empirical review and from the chapter it is
noted that they support each other in sense that they all draw the conclusion that

xxiv
HIV/AIDS impacts negatively on human capital and in turn economic growth. In the next
chapter the researcher will look at the model to be used in the research and also do justify
his variables.

xxv
 CHAPTER FOUR

RESULTS PRESENTATION AND INTERPRETATION

4.0 Introduction
This chapter will mainly focus on the presentation of the results of the estimated model
and the interpretation of the regression equation estimated using E-views computer
package. When interpreting and analysing the results, the researcher will link the results
obtained to known theory and empirically tested models from other countries. The results
will cover period under study 1985-2009, although interpretations may include current
events that are unfolding in the economy.

4.1 Descriptive Statistics

Quantitatively describe the main features of a collection of data .These are the measures
of dispersion namely the maximum ,minimum, and the standard deviation, probability,
and the mean. The maximum and the minimum values help in checking outlier in the
data. The standard deviation shows variability in the data .Conversely, this implies the
extent to which the estimated mean varies from the expected mean. The table below
shows, the descriptive statistics that are mostly used. There are 25 observations on each
variable.

xxvi
Table 1: Descriptive Statistics:

GDP GNS PR PI LF
Mean 768.9108 -41506.64 16.6440 6717.560 1251.0106
Median 720.5800 2849.000 17.19000 6100.000 1240.300
Maximum 2484.080 34762.00 29.00000 46049.00 1896.400
Minimum 47.94000 -214467.0 -74985.00 4.300000 578.4000
Std. Dev. 618.9459 87310.96 6.736919 23526.32 290.5582
Skegness 0.72936 -1.003672 -0.265820 -1.570369 0.144842
Kurtosis 3.273670 2.305876 2.091080 7.415685 3.795597

Jarque-Bera 2.632135 4.699207 1.154965 30.58596 0.746763

Probability 0.268188 0.095407 0.561310 0.00000 0.688403

Observations 25 25 25 25 25

The table also gives the maximum and minimum statistics and the statistics shows that
there are no outliers. Gross national savings maximum value is 34762.00 and its
minimum value is -214467.0 with mean -431506.64 showing that GNS is skewed to the
left. GDP has a maximum value of 2484.080 and a minimum value 47.94000 with a
standard deviation of 618.9459.The mean value for PR is 16.6440 and the median value is
17.19000.This implies that the distribution for prevalence rate is skewed to the right. For
investment, its probability is 0.006761 which indicate non-normality. This means the
research can be proceeded with as the bulk of the variables are normal which lead to the
rejection of the null hypothesis of non-normality.

xxvii
 4.2 Unit root test

Table 2: Stationarity at level

ADF UNIT
ROOT TEST
VARIABLES ADF TEST CRITICAL
STATISTIC VALUES
1% 5% 10%
GDP -1.853442 -2.6700 -1.9566 -1.6235
GNS -1.329798 -2.6700 -1.9566 -1.6235
PI -2.966647 -2.6700 -1.9566 -1.6235
PR 0.004435 -2.6649 -1.9559 -1.6231
LF -0.430330 -2.66649 -1.9559 -1.6231

Appendix II shows the complete results for the Augmented Dickey-Fuller Test.

The unit root tests show that only private investment is stationary at level, therefore first
difference was computed to test for stationarity of the other non-stationary variables. The
table below shows the results of the first difference unit root test.

Table 3: Stationarity at first difference

ADF Unit Root Test (without Intercept)
VARIABLES ORDER OF ADF TEST CRITICAL
INTEGRATION STATISTIC VALUES
1% 5% 10%
GDP I(1) -6.231603 -2.6700 -1.9566 -1.6235
GNS I(1) -1.210356 -2.6700 -1.9566 -1.6235
PI I(0) -2.966647 -2.6649 -1.9559 -1.6231
PR I(1) -6.091024 -2.6700 -1.9566 -1.6235
LF I(1) -4.610219 -2.66649 -1.9559 -1.6231
Appendix II shows the complete results for the Augmented Dickey-Fuller Test.

xxviii
The results of the first difference showed that the former non-stationary variables that
were gross national product, prevalence rate, labour force and gross national savings were
now stationary after first difference. These findings apply to the 1%, 5% and 10% critical
values. Further regressions are to be done on the levels at which the variables are
stationary.

4.3 Presentation of the results

Gross domestic product is the depended variable. The results of the Ordinary Least
Squares (ODL) are present in table below.

TABLE 4: Presentation of the results

Variable Coefficient Standard Error t-Statistics P-Value

C 1928.473 421.7762 4.572266 0.0002***
DGNS 0.003129 0.001250 2.503860 0.0211**
PI 0.001206 0.004345 0.277530 0.7842
DLF -0.201074 0.376391 -0.534214 0.5991
DPR -46.56077 16.71997 -2.784741 0.0114***
***, ** and* denotes significance at the 1%, 5% and 10% level.

Based on the model estimated in the last chapter, the following results were generated

DGDP=1928.473+0.003129DGNS+0.001206PI-0.201074DLF-46.56077DPR+μ

R squared = 0.578359 F-statistics = 6.8558421

Adjusted R squared = 0.494030 Prob (F-Statistic) = 0.001205

DW = 1.540423

xxix
The F-statistic is for testing the significance of the whole model. The model is significant
since its probability is less than 5%. The F-statistic is also significant because it is greater
than 5 (Rule of Thumb).

4.4 Goodness of Fit

R²= 0.578359 and this means that almost 58% of variations in economic growth is
explained by some of the variables in the model, the other 42% is captured by the
residual. Adjusted R²= 0.494030, this means that the model explains almost 50% of the
variations after taking the degrees of freedom into account.

4.5 Autocorrelation
Considering the DW statistic of 1.5404323 it shows that we cannot conclude that there is
serial autocorrelation or no serial auto correlation. The DW statistic is greater than R²
implying that there is absence spuriousness in the model. Considering the graph below,
DW-statistic is 1.540423 which lies between 0.79 and 1.89 therefore it falls in the zone of
indecision. Gujarati (2004) says, although extremely popular, the d test has one great
drawback in that, if it falls in the indecisive zone, one cannot conclude that (first-order)
autocorrelation does or does not exist.

Figure 3: Durbin–Watson d Statistic.

Reject H0 Reject H0
There is + There is -
auto auto
correlation Do not correlation
Zone of reject H0 Zone of
indecision indecisi
on

0 0.756 1.645 2.46 3.355 4

DW
Statistics
1.540423

xxx
4.6 Interpretation of results

Intercept (C). Holding other things constant, without taking into consideration the other
variables, there will be an increase in economic growth by 1928.473 units as indicated by
the constant and it is statistically significant in the model.

Gross National Savings (DGNS) is statistically significant at 5% level of significance as

shown by P-value 0.0211. It is supported by its coefficient value of 0.003129 which
shows a positive relationship between a change in gross national savings (DLGNS) and a
change in gross domestic product (DGDP). The elasticity of a change in gross national
savings of 0.003129 implies that a 1% increase in the change in gross national savings
increase gross domestic product by 0.3129%. Savings are an engine to economic growth,
thus the productive people are encouraged to save more thereby finding extra funds for
investments and hence a boost in economic growth.

Labour force (DLF) has P-value of 0.5991 which mean that the variable is statistically
insignificant. The labour force coefficient is -0.201074. Loewenson and Whiteside
(1997), first HIV/AIDS affects labour productivity due the increase in disability, the
premature death of workers, which reduces the level of accumulated level of knowledge,
hence causing economic growth to fall. However the impact of labour force on economic
growth in Zimbabwe is not significant as attested by the model. Empirical results show
that the labour force on its own has no significance on economic growth and other macro-
economic variables. This could be due to the not so reliable statistical data that are
compiled which will not be the real situation on the ground. Some statistics are not found
or recorded such that most information is lost. Also due to the increase in the state of
technology most production has become automated. Hence we find that there are very
few people that will be employed as most production uses machinery.

Prevalence rate (DPR) is statistically significant at 1% significance level with P-value of

0.0114. Its coefficient value is -46.56077 suggesting that there is a negative relationship
between a change in gross domestic product and a change in prevalence rate. This is also

xxxi
the proxy to HIV/AIDS. This can be interpreted that; if the change in prevalence rate
increase by one unit, change in gross domestic product will fall by 1.14% thus suggesting
that there is a negative relationship between change in gross domestic product and change
in the HIV/AIDS prevalence rate. The higher the rate at which people are being infected
in Zimbabwe, the lower the level of economic growth. As more people are affected this
means that their performance capacity is lowered and productivity is reduced meaning
that ultimately GDP is affected. This is quite significant in the model. This is in
consistence with our traditional prevailing view that prevalence rate negatively affect
economic growth, MOCHW (2003).

Private Investment (PI) is statistically insignificant at 1% significance level as shown by

its P-value of 0.7842. According to economic theory if private investment increases gross
domestic product will also increase. However, empirical results have shown that changes
in private investment is statistically insignificant on economic growth.

4.7 Conclusion
Basing on the results above the researcher can conclude that HIV/AIDS impacts
negatively on human capital and in turn affects economic growth. If the prevalence rate
increases the resultant effect is a fall in economic growth. The other variables used in the
model proved to have a positive relationship with economic growth except for labour
force which is inversely related to economic growth in the model.

xxxii
xxxiii
 CHAPTER FIVE

POLICY RECOMMENDATIONS AND CONCLUSION

5.0 Introduction
In this chapter of the research, the main focus is on the conclusions drawn from the study
and makes some recommendations for policy makers. Suggestions for further studies are
also given.

5.1 Policy recommendations

Generally, policy measures should reduce the amount of unproductive years lost due to
HIV and AIDS. This is achieved through policies targeted at reducing HIV and AIDS
incidence, which is, preventive measures and policies targeted at improving the quality of
people living with HIV and AIDS thereby reducing their desirability weighting while
prolonging their lives as well. Some of these policies are highlighted below.

 Nutritional Guidance to reduce effects of falling labour force on GDP

This reduce high rate of absenteeism for economical active groups of the society who
contribute mainly to GDP growth. The nutrition programme provides education,
information and support to HIV and AIDS victims on good nutrition. The importance of
this measure lies in its ability to prolonging the asymptotic stage. The prolonging of this
critical stage depends crucially on one’s diet. Furthermore the chances of success are
higher at this stage in the latent stage.

 Sporting as an indirect way to reduce HIV/AIDS prevalence rate

xxxiv
HIV/aids can also be fought using sporting as a tool to reduce it. If sporting activities can
be encouraged in townships this can also help fight the disease because if people do not
have much to entertain themselves they will end up in sexual activities. Communities
should be exposed to free sporting games such as community soccer and have some
tournaments just to keep the community entertained.

 Education as a policy to reduce effects of HIV/AIDS on labour force (LF)

Since we know that generally the educated people always make good decisions and they
do have better income earning opportunity unlike the less educated. Children must be
encouraged to go to school and they must also be taught about the pandemic so that they
will grow up aware of the deadly disease. There must also be a heavy penalty for
prostitution because it’s the major transporter of the disease. If prostitution can be fined
for long jail terms, its level will be reduced and thereby the cases of HIV/AIDS will also
decline.

 Awareness campaigns and openness about the disease to reduce number of infections

This involve educating people about the effects of HIV/AIDS and encouraging the youths
not to abstain from abstinence. The youths between the ages of 15-26 years must be most
targeted group as they are rendered to be the most sexually active group. People should be
encouraged to be more open when it comes to issues of the pandemic, for example if
someone dies of AIDS, it must be made clear to everyone that the person’s death is a
result of the disease, especially in family setups.

 Peer education to reduce HIV/AIDS infections which begets prevalence rate

This strategy aims at promoting behavioural change through communication intervention.

This involves reaching out the target groups (the youth being the major focus) and
informing them about the deadly effects of AIDS, the methods of transmission of HIV. If
successfully implemented, the strategy effectively reduces incidence and therefore a long-
term strategy.

 VCT

xxxv
Voluntary Counselling and Testing (VCT) is not only a key component of both HIV
prevention and care programmes but is the gateway to both prevention and care. Policy
measures should be targeted at expanding the network of VCT centres and promotes the
use of these centres especially in rural areas where there are low visits to VCT.

 Training and wellness campaigns

This programme is aimed at management in commercial and industrial enterprises on

awareness and education. Management is encouraged to provide proper HIV and AIDS
workplace programmes for care and support of employees. This emphasizes the need to
regard and treat HIV as just one of a correct diet and conditions that can be prevented and
managed through adoption of a correct diet and a holistic life style. This can be achieved
by setting up a four-stage welfare plan beginning with nutritional support, and the
subsidized prophylaxes and treatment for opportunistic infections followed by the
provisions of antiretroviral treatment.

5.2 Conclusion
HIV and AIDS is the leading cause of morbidity and mortality in Zimbabwe. This has
wide implications on the Zimbabwean economy as it affects the economy’s capacity to
accumulate human capital stock, diminishes labour supply as well as labour productivity.
From this study, using the capital approach, there is an indication that HIV and AIDS will
lead to a decline in GDP by 46.56077; however there are a credible pointer to the impact
HIV and AIDS had on the Zimbabwean economy. This impact is significant and severe
given that the effect of HIV and AIDS on the economy shall continue to be felt in many
more years to come even if the incidence drops to zero today. Thus HIV and AIDS’
impact on the macro-economy cannot be ignored and mitigatory measures need to be
taken as soon as possible. Such measures should aim at reducing HIV and AIDS
incidence and enhancing the lives of people living with HIV and AIDS and prolonging
the transition period before one has AIDS and reduces illness in the asymptotic stage.
This would eventually reduce the number of healthy life years lost due to HIV and AIDS
morbidity on output.

xxxvi
xxxvii
5.3 Areas for future study
The human capital model employed in the study assumes identical transition/progression
rates across areas, sectors and skills categories. There is need to explore the possibility
that progression maybe different across location, skills categories and sectors as a result
of different relative labour demands different access to treatment across income levels.
The physical demands differs from one skill category to another such that a given
disability class may have different impact on output across sectors and skills
requirements. A model with different progression rates for different age groups also needs
to be considered. The model also measures the direct impact of HIV and AIDS on outputs
as a result of its impact on labour supply. It will be interesting to analyse the effect of not
only such an impact, but have adopted coping strategies on macro-economic variable.
This requires an analysis using Computable General Equilibrium (CGE) framework.

xxxviii
 REFERENCES
Arndt, Channing and Jeffrey (2000), The Macro Implications of HIV and AIDS in
South Africa, A Preliminary Assessment. South African Journal Economics vol 6, p15

Arndt and Channing (2000), International AIDS Economic Network by Symposium,

SAFAIDS

Behrman JR (1999), Health and Economic Growth: Theory, Evidence and Policy,
University of Pennsylvania, Philadelphia, PA USA.

Becker G.S. (1965), “A Theory of the Allocation of Time”, Economic Journal 75; 493-
517.

Becker G.S (1967), Human Capital and the Personal Distribution of Income; An
Analytical Approach (University of Michigan, Ann Arbor, Michigan). Also available in
G.S Becker (1993, Human Capital, Third Edition (University of Chicago Press) p102-158

Ben-Porath, Y. (1967), “The Production of Human Capital and the Lifecycle of

Earnings”, Journal of Political Economy 75:353-367.93

Bentham,J. (1931), Principles of Legislation, (Harcourt, Brace and Co., New York).

Bollinger, Lorri and Stover (1999), The Economic Impact of AIDS, The Futures Group
International, Glastonbury.

Bonnel (2000), HIV and AIDS: “Does it Increase or Decrease Growth?” South African
Journal of Economics, vol 3 p12.

Bureau for Economic Research (2000), “The Macro Economic Impact of HIV and
AIDS in South Africa”, Economic Research Note no.10

Central Statistics Office (March 2000),’National Accounts 1985-2000’, p10

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Cuddington, John and Hancock (1995), “The Macroeconomic Impact of AIDS in
Malawi”, A Dualistic Labour Surplus Economy, Journal of African Economies, vol 4, p9

Gujarati D.N, (1995), Basic Econometrics, 2nd Edition, Mc GrawHill, New York.

Robert G.J, (1990) Macroeconomics, 3rd Edition, Soot Foreman and Company.

Grabwski R and Shield M, Development Economics, 1st Edition, Blackwell Publishers

Grossman M (April 1999), “The Human Capital Model of the Demand for Health”,
NBER Working Paper Series 7078: 110

Haacker M (2002), The Economic Consequence of HIV and AIDS in Southern

Africa: IMF Working Paper

Robalino, David and Picazoo (2002), “The Macroeconomic Impact of AIDS in

Kenya”, Estimating Optimal Reduction Targets for the HIV and AIDS incidence rate,
Journal of Policy Modelling, (pp152-218)

ING Baring, South African Research (2000), Economic Impact of AIDS in South
Africa, a dark cloud on the horizon.

Kara Hanson (1992) “AIDS: “What does Economics has to offer?” Health Policy and
Planning Vol 7 No 4 pp315

Kambou, Devarajon and Over (1992), “The economic impact of AIDS in an African
Country: Simulation with a Computable General Equilibrium model of Cameroon”,
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Kwaramba P (1997) “Socio Economic Impact of AIDS on Communal Agricultural

Systems in Zimbabwe”, Zimbabwe Farmers Union, Fredrich Ebert Stiftung economic
advisory project, Working Paper 19.

Lowenson and Whiteside (2001) HIV and AIDS: Implications for Poverty Reduction:
Paper prepared for the UNDP for the UN General Assembly Special Session on HIV and
AIDS, 25-27 June 2001.

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Matanhure N (2003), “The Demographic Impact of AIDS”: Zimbabwe report for the
Zimbabwe Human Development Report 2003, IDs, Zimbabwe.

Mincer J. (1974), Schooling, Experience, and Earnings (Columbia University Press for
the National Bureau of Economic Research, New York).

Ministry of Health and Child Welfare, May 2004.

Matshe, Pimhidzai, Shamu (2006) “The Impact of HIV and AIDS on the Zimbabwean
Economy”, Zimbabwe Economic and Policies Analysis and Research Unit, Working
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Olukogo (2005), “Analysis of Institutional Capacity for Health Sector Reform”: A

Conceptual Framework, School of Economics and Finance, University of KwaZulu-
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Ojo K and Delaney M (1997),”Economic and Demographic Consequences of AIDS in

Namibia”, International Journal of Health Planning and Management, Rapid Assessment
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xli
APPENDICES:

APPENDIX I
Year GDP(ZWD) GNS(ZWD) PI(ZWD) LF(ZWD) PR (%)
million million million million
1985 1729.13 1085 1622 1463 4.3
1986 1140.28 1081.1 1869 1884 5.9
1987 1382.1 1052.5 1673 1755 6.8
1988 2454.08 1166.3 2639 2849 7.3
1989 1556.38 1131 2633 2632 8.7
1990 1248.32 1244 3735 3369 9.2
1991 871.8 1192.1 6305 4746 11.9
1992 459.22 1240.3 6688 3626 14.3
1993 720.58 1236.2 7606 6701 16.4
1994 929.6 1239.6 16276 15148 18.1
1995 915.31 1263.31 15767 14000 19.4
1996 1060.42 1274.1 17757 17319 20.6
1997 1210.05 1348.5 21970 12752 29
1998 711.92 1323.2 34747 28519 21.6
1999 377.54 1628.2 34988 34762 25
2000 371.81 1553 46049 9701 24.2
2001 278.26 1488 37349 -87369 23.9
2002 140.92 1316 -74985 -107517 22.8
2003 52.38 1847.3 -35453 -132209 22.1
2004 47.94 1896.4 937 -162500 21.3
2005 74.05 722.3 488 -188200 20.1
2006 54.06 578.4 1200 -204430 17.19
2007 985.02 987.07 3400 -210000 16.06
2008 125.8 1105.39 6100 -214467 15.7

xlii
2009 325.8 1276 6579 17800 14.26
Source: ZIMSTAT

APPENDIX II
Unit root test in level:

ADF Test Statistic -1.853442 1% Critical Value* -2.6649

5% Critical Value -1.9559

10% Critical Value -1.6231

*MacKinnon critical values for rejection of hypothesis of a unit

root.

Augmented Dickey-Fuller Test Equation

Dependent Variable: D(GDP)

Method: Least Squares

Date: 10/27/11 Time: 18:18

Sample(adjusted): 1986 2009

Included observations: 24 after adjusting endpoints

Variable Coeff Std. Error t-Statistic Prob.

GDP(-1) -0.164399 0.088699 -1.853442 0.0767

R-squared 0.115326 Mean dependent var -

58.47208

Adjusted R-squared 0.115326 S.D. dependent var 460.7266

S.E. of regression 433.3460 Akaike info criterion 15.02172

Sum squared resid 4319142. Schwarz criterion 15.07081

xliii
Log likelihood -179.2607 Durbin-Watson stat 2.331478

ADF Test Statistic -1.329798 1% Critical Value* -2.6649

5% Critical Value -1.9559

10% Critical Value -1.6231

*MacKinnon critical values for rejection of hypothesis of a unit

root.

Augmented Dickey-Fuller Test Equation

Dependent Variable: D(GNS)

Method: Least Squares

Date: 10/27/11 Time: 18:24

Sample(adjusted): 1986 2009

Included observations: 24 after adjusting endpoints

Variable Coeff Std. Error t-Statistic Prob.

GNS(-1) -0.143463 0.107883 -1.329798 0.1966

R-squared 0.071243 Mean dependent var 680.7083

Adjusted R-squared 0.071243 S.D. dependent var 54094.22

S.E. of regression 52131.71 Akaike info criterion 24.60171

Sum squared resid 6.25E+10 Schwarz criterion 24.65079

Log likelihood -294.2205 Durbin-Watson stat 1.075623

xliv
ADF Test Statistic -2.966647 1% Critical Value* -2.6649

5% Critical Value -1.9559

10% Critical Value -1.6231

*MacKinnon critical values for rejection of hypothesis of a unit

root.

Augmented Dickey-Fuller Test Equation

Dependent Variable: D(PI)

Method: Least Squares

Date: 10/27/11 Time: 18:25

Sample(adjusted): 1986 2009

Included observations: 24 after adjusting endpoints

Variable Coeff Std. Error t-Statistic Prob.

PI(-1) -0.554915 0.187051 -2.966647 0.0069

R-squared 0.276706 Mean dependent var 206.5417

Adjusted R-squared 0.276706 S.D. dependent var 26363.93

S.E. of regression 22421.65 Akaike info criterion 22.91422

Sum squared resid 1.16E+10 t-Statistic Prob.

Schwar
z criterion
22.96330

Log

xlv
likelihood
-273.9706
Durbin-
Watson
stat
1.814721

ADF Test
Statistic
0.004435
1%
Critical
Value*
-2.6649

5%
Critical
Value
-1.9559

xlvi
 10%
Critical
Value
-1.6231

*MacKin
non
critical
values for
rejection
of
hypothesi
s of a unit
root.

Augmente
d Dickey-
Fuller
Test
Equation

Dependen
t Variable:
D(PR)

Method:
Least
Squares

xlvii
Date:
10/27/11
Time:
18:27

Sample(a
djusted):
1986 2009

Included
observatio
ns: 24
after
adjusting
endpoints

Variable
Coeff
Std. Error
t-Statistic
Prob.

PR(-1)
0.000141
0.031884
0.004435
0.9965

R-squared
-0.023154

xlviii
 Mean
dependent
var
0.415000

Adjusted
R-squared
-0.023154
S.D.
dependent
var
2.785949

S.E. of
regression
2.818017
Akaike
info
criterion
4.950718

Sum
squared
resid
182.6480
Schwar
z criterion
4.999803

Log
likelihood
-58.40861

xlix
 Durbin-
Watson
stat
2.477529

ADF Test
Statistic
-0.430330
1%
Critical
Value*
-2.6649

5%
Critical
Value
-1.9559

10%
Critical
Value
-1.6231

l
*MacKin
non
critical
values for
rejection
of
hypothesi
s of a unit
root.

Augmente
d Dickey-
Fuller
Test
Equation

Dependen
t Variable:
D(LF)

Method:
Least
Squares

Date:
10/27/11
Time:
18:28

li
Sample(a
djusted):
1986 2009

Included
observatio
ns: 24
after
adjusting
endpoints

Variable
Coeff
Std. Error
t-Statistic
Prob.

LF(-1)
-0.020434
0.047485
-0.430330
0.6710

R-squared
0.007257
Mean
dependent
var
7.958333

lii
Adjusted
R-squared
0.007257
S.D.
dependent
var
299.6153

S.E. of
regression
298.5262
Akaike
info
criterion
14.27637

Sum
squared
resid
2049711.
Schwar
z criterion
14.32545

Log
likelihood
-170.3164
Durbin-
Watson
stat
1.941921

liii
Unit root
test in
first
deference
:
ADF Test
Statistic
-4.610219
1%
Critical
Value*
-2.6700

5%
Critical
Value
-1.9566

10%
Critical
Value

liv
-1.6235

*MacKin
non
critical
values for
rejection
of
hypothesi
s of a unit
root.

Augmente
d Dickey-
Fuller
Test
Equation

Dependen
t Variable:
D(LF,2)

Method:
Least
Squares

Date:
10/13/11
Time:

lv
22:16

Sample(a
djusted):
1987 2009

Included
observatio
ns: 23
after
adjusting
endpoints

Variable
Coeff
Std. Error
t-Statistic
Prob.

D(LF(-1))
-0.989845
0.214707
-4.610219
0.0001

R-squared
0.491212
Mean
dependent
var
7.587391

lvi
Adjusted
R-squared
0.491212
S.D.
dependent
var
429.6198

S.E. of
regression
306.4451
Akaike
info
criterion
14.33046

Sum
squared
resid
2065989.
Schwar
z criterion
14.37983

Log
likelihood
-163.8003
Durbin-
Watson
stat
1.975394

lvii
ADF Test
Statistic
-6.091024
1%
Critical
Value*
-2.6700

5%
Critical
Value
-1.9566

10%
Critical
Value
-1.6235

*MacKin
non
lviii
critical
values for
rejection
of
hypothesi
s of a unit
root.

Augmente
d Dickey-
Fuller
Test
Equation

Dependen
t Variable:
D(PR,2)

Method:
Least
Squares

Date:
10/13/11
Time:
22:17

Sample(a
djusted):

lix
1987 2009

Included
observatio
ns: 23
after
adjusting
endpoints

Variable
Coeff
Std. Error
t-Statistic
Prob.

D(PR(-1))
-1.254158
0.205903
-6.091024
0.0000

R-squared
0.627422
Mean
dependent
var
0.132174

Adjusted
R-squared

lx
0.627422
S.D.
dependent
var
4.532960

S.E. of
regression
2.766880
Akaike
info
criterion
4.915822

Sum
squared
resid
168.4237
Schwar
z criterion
4.965192

Log
likelihood
-55.53196
Durbin-
Watson
stat
1.835726

lxi
ADF Test
Statistic
-2.966647
1%
Critical
Value*
-2.6649

5%
Critical
Value
-1.9559

10%
Critical
Value
-1.6231

*MacKin
non
critical

lxii
values for
rejection
of
hypothesi
s of a unit
root.

Augmente
d Dickey-
Fuller
Test
Equation

Dependen
t Variable:
D(PI)

Method:
Least
Squares

Date:
10/13/11
Time:
22:18

Sample(a
djusted):

lxiii
1986 2009

Included
observatio
ns: 24
after
adjusting
endpoints

Variable
Coeff
Std. Error
t-Statistic
Prob.

PI(-1)
-0.554915
0.187051
-2.966647
0.0069

R-squared
0.276706
Mean
dependent
var
206.5417

Adjusted
R-squared

lxiv
0.276706
S.D.
dependent
var
26363.93

S.E. of
regression
22421.65
Akaike
info
criterion
22.91422

Sum
squared
resid
1.16E+10
Schwar
z criterion
22.96330

Log
likelihood
-273.9706
Durbin-
Watson
stat
1.814721

lxv
ADF Test
Statistic
-1.210356
1%
Critical
Value*
-2.6700

5%
Critical
Value
-1.9566

10%
Critical
Value
-1.6235

*MacKin
non
lxvi
critical
values for
rejection
of
hypothesi
s of a unit
root.

Augmente
d Dickey-
Fuller
Test
Equation

Dependen
t Variable:
D(GNS,2)

Method:
Least
Squares

Date:
10/13/11
Time:
22:19

Sample(a
djusted):

lxvii
1987 2009

Included
observatio
ns: 23
after
adjusting
endpoints

Variable
Coeff
Std. Error
t-Statistic
Prob.

D(GNS(-
1))
-0.568294
0.469526
-1.210356
0.2390

R-squared
0.029631
Mean
dependent
var
10080.26

Adjusted
R-squared

lxviii
0.029631
S.D.
dependent
var
55103.90

S.E. of
regression
54281.37
Akaike
info
criterion
24.68425

Sum
squared
resid
6.48E+10
Schwar
z criterion
24.73362

Log
likelihood
-282.8689
Durbin-
Watson
stat
1.149461

lxix
ADF Test
Statistic
-6.231603
1%
Critical
Value*
-2.6700

5%
Critical
Value
-1.9566

10%
Critical
Value
-1.6235

*MacKin
non
critical

lxx
values for
rejection
of
hypothesi
s of a unit
root.

Augmente
d Dickey-
Fuller
Test
Equation

Dependen
t Variable:
D(GDP,2)

Method:
Least
Squares

Date:
10/13/11
Time:
22:20

Sample(a
djusted):

lxxi
 1987 2009

Included
observatio
ns: 23
after
adjusting
endpoints

Variable
Coeff
Std. Error

D(GDP(-1)) -1.244761 0.199750 -6.231603 0.0000

R-squared 0.637533 Mean dependent var 34.29783

Adjusted R-squared 0.637533 S.D. dependent var 736.2439
S.E. of regression 443.2574 Akaike info criterion 15.06868
Sum squared resid 4322497. Schwarz criterion 15.11805
Log likelihood -172.2899 Durbin-Watson stat 2.082093

APPENDIX III
ESTIMATION EQUATION:

lxxii
Dependent Variable: GDP

Method: Least Squares

Date: 10/13/11 Time: 22:24

Sample: 1985 2009
Included observations: 25

Variable Coeff Std. Error t-Statistic Prob.

C 1928.473 421.7762 4.572266 0.0002

GNS 0.003129 0.001250 2.503860 0.0211
PI 0.001206 0.004345 0.277530 0.7842
LF -0.201074 0.376391 -0.534214 0.5991
PR -46.56077 16.71997 -2.784741 0.0114

R-squared 0.578359 Mean dependent var 768.9108

Adjusted R-squared 0.494030 S.D. dependent var 618.9459
S.E. of regression 440.2658 Akaike info criterion 15.18949
Sum squared resid 3876679. Schwarz criterion 15.43327
Log likelihood -184.8686 F-statistic 6.858421
Durbin-Watson stat 1.540423 Prob(F-statistic) 0.001205

lxxiii