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A Solow-style model is developed to study the effects of the AIDS epidemic on the growth path of the economy and GDP per capita. The model uses conjectures about the demographic effects of AIDS in Tanzania to estimate the macroeconomic effects on the economy. The findings suggest that, without decisive policy action, AIDS may reduce Tanzanian DGP in the year 2010 by 15 to 25 percent in relation to a counterfactual no-AIDS scenario. Per capita income levels are expected to fall by 0 to 10 percent by 2010.
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John T. Cuddington (1993) studied this question.
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