This paper simulates the macroeconomic effects of the AIDS epidemic in Malawi. This is done by using Bulatao's (1990) predictions of the disease's demographic impact in a dual-economy macro model. The with-AIDS scenario is compared with a counterfactual no-AIDS scenario to assess the impact of the disease if it spreads unchecked. The results suggest that by the year 2010, Malawian real GDP could be as much as 10% smaller than it would have been in the absence of the AIDS epidemic. The impact on per capita income is smaller, ranging from 0% to 3% lower than it would have been in the no-AIDS case by 2010.
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Cuddington et al. (1995) studied this question.