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GTAP Resource #689

"The HIV/AIDS Pandemic in South Africa: Sectoral Impacts and Unemployment"
by Arndt, Channing and Jeffrey Lewis


Abstract
South Africa is currently confronting an HIV/AIDS crisis. In this paper, we seek to investigate the interactions between unemployment and AIDS. Prior to projecting the impacts of the pandemic on unemployment, recently compiled historical data on employment, unemployment, and remuneration are presented. Job creation performance over the past three decades in the unskilled and semi-skilled labor category has been dismal. Rapid real remuneration growth for this class of labor is one likely causal factor. By 1999, real remuneration per unskilled and semi-skilled worker had grown to 250% of the 1970 level while remuneration for other categories had remained essentially flat.

With this historical background in mind, we turn to examining the interactions between the AIDS pandemic and unemployment. Even though the pandemic is projected to drive growth rates in the supply of unskilled and semi-skilled labor to around zero, our analysis indicates that the pandemic will also depress labor demand leaving the unemployment rate, in our base "AIDS" scenario, essentially unchanged compared to a fictional "no AIDS" scenario. The pandemic depresses labor demand through three effects.

· Declines in the rate of overall economic growth.

· Pronounced declines in sectors that supply investment commodities, particularly the Construction and Equipment sectors. These two sectors happen to use unskilled and semi-skilled labor intensively.

· AIDS induced morbidity effects on unskilled and semi-skilled workers tend to depress output relatively more in sectors that use unskilled and semi-skilled labor intensively with further negative implications for employment.

Countering these three effects will be key to palliating the negative economic consequences of the pandemic. Results indicate that a policy of real wage moderation presents a straightforward option for bolstering overall economic growth and reducing unemployment.


Resource Details (Export Citation) GTAP Keywords
Category: 2001 Conference Paper
Status: Published
By/In: Presented at the 4th Annual Conference on Global Economic Analysis, Purdue University, USA
Date: 2001
Version: n.a.
Created: (5/31/2001)
Updated: Arndt, C. (5/31/2001)
Visits: 2,039
No keywords have been specified.


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