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Development Economics
Applied Microeconomics

Development Economics
Applied Microeconomics
Health Economics

Microeconomic and Macroeconomic Theory (Written), 2001
Development and Microeonomic Theory (Oral), 2002

The Economic Impact of AIDS Treatment and HIV Testing in Western Kenya

Professor Christopher Udry
Professor T. Paul Schultz
Professor Michael Boozer
Professor Joshua Graff Zivin

May 2006

M.Phil., Economics, Yale University, 2003
M.A., Economics, Yale University, 2002
B.A., Economics (with high honors) and Physics, Oberlin College, 1998

Yale University Dissertation Fellowship, 2005
John F. Enders Fellowship, Summer 2005
Pilot Project in HIV/AIDS Prevention Research Grant (with Christopher Udry), Center for Interdisciplinary
   Research on AIDS, Yale University School of Medicine, 2004–2005
Risk and Development Field Research Grant, Social Science Research Council, 2004
Sasakawa Fellowship, 2002–2003
Yale University Fellowship, 2000–2004
Honorable Mention, National Science Foundation Graduate Fellowship Competition, 2000
Phi Beta Kappa, 1998
Sigma Xi, 1998
Joel Dean Prize in Economics, Oberlin College, 1998
Carl E. Howe Prize in Physics, Oberlin College, 1998
Oberlin College Scholarship, 1994–1998

Introductory Microeconomics, Fall 2003

Olympic National Park, Port Angeles, WA. Spotted Owl Population Survey Team, 2000.
National Economic Research Associates (NERA), New York and Cambridge. Associate Analyst, 1998–2000.

Spanish, Swahili, Tamil

Professor Christopher Udry
Department of Economics
Yale University
PO Box 208269
New Haven, CT 06520-8269
Phone: (203) 432-3637
Fax : (203) 432-3898
Email: udry@yale.edu

Professor T. Paul Schultz
Department of Economics
Yale University
PO Box 208269
New Haven, CT 06520-8269
Phone: (203) 432-3629
Fax : (203) 432-5591
Email: paul.schultz@yale.edu

Human immunodeficiency virus (HIV) infection and acquired immune deficiency syndrome (AIDS) currently affect 25 million people in sub-Saharan Africa, many of them working-age adults. Some impacts of the HIV pandemic have been severe: sustained reductions in life expectancy (to 35 years in some countries) and the creation of many orphans (12 million children), for example. There is also recognition that the political and economic impacts can be far-reaching. Recent years have seen the emergence of HIV testing services and life-saving antiretroviral (ARV) therapy as important components of the policy response to HIV/AIDS, and the scaling-up of these interventions is currently a pressing challenge in many countries. However, at this critical time, little is known about the impact of these interventions on individual and household well-being, and some have questioned the emphasis on ARV therapy in settings where there are limited resources and many competing needs. Using panel data from a year-long household survey I conducted in collaboration with a rural HIV clinic in western Kenya, my dissertation provides insights into two central issues: the socio-economic impact of ARV therapy and the effect of learning about HIV status on individual decision-making.

Treatment of AIDS patients with ARV therapy is known to be highly effective in reducing morbidity and mortality. The first chapter, The Economic Impact of AIDS Treatment: Labor Supply in Western Kenya (with Markus Goldstein and Joshua Graff Zivin), identifies the impact of ARV therapy on two outcomes: 1) the labor supply of adult AIDS patients receiving treatment; and 2) the labor supply of children and adults in the patients’ households. These impacts are identified by examining changes in the treatment group’s labor supply over time. In addition, data from a random sample of adults in the survey area are used to control for time-varying factors (such as seasonality) that might bias the results. To emphasize that we are identifying the impact of changes in health status, we exploit variation in the length of time patients had been exposed to ARV treatment prior to the start of the survey. As we show with linked medical data for patients receiving ARV therapy, this variation is useful because health improvements are largest in the initial months of treatment. We find that the provision of ARV therapy results in a large and relatively immediate increase in the labor supply of AIDS patients. Within three to six months after initiation, there is a 20 percent increase in the likelihood of participating in the labor force and a 35 percent increase in weekly hours worked. Due to the efficacy of treatment, there are ethical constraints to observing comparable AIDS patients who are not receiving ARV therapy. However, citing medical evidence that life expectancy is extremely short without treatment, we argue that the estimated labor supply impacts are actually underestimates of the true impact of treatment on the treated.

To estimate the impact of treatment on the labor supply of children and adults living with AIDS patients, two competing factors are emphasized: 1) as the patient begins to work and earn money, there is an income effect for the family which results in other household members having to work less and 2) as the patient’s health improves, the time demanded for taking care of the patient is diminished, thereby expanding other household members’ time endowment for work and leisure. The panel data are then used to examine the labor supply of children and adults separately. We find heterogeneous responses in labor supply, with boys and women likely to work less after treatment is initiated for the adult patient. Girls and men living in the patients’ households, on the other hand, have no significant change in labor supply. This result is consistent with the hypothesis that boys and women are compensating for the reduced labor supply of the AIDS patient, and that the need for these individuals to work is reduced due to ARV therapy.

The second chapter, AIDS Treatment and Household Welfare, uses data from the same survey to examine what happens to the welfare of family members when AIDS patients are given ARV therapy. I examine a range of outcomes including food consumption, child nutrition, and transfers of money and goods from individuals outside the family. The impact on child nutrition is found to be particularly large and non-linear: weight-for-height of children (under the age of 5 years) living with adult AIDS patients increases by almost 0.5 standard deviations soon after the initiation of treatment. This result is consistent with evidence that adult patients’ health status and labor supply both respond non-linearly to treatment. The estimated impacts on food consumption and transfers are found to be smaller and statistically insignificant, with the exception of a significant increase in transfers sent out by patients after initiation of treatment.

These two chapters together represent the first attempt to estimate the short- and medium-term impacts of ARV therapy on economic outcomes at the family level. The results have significant implications for policy. First, they underscore the importance of expanding access to ARV therapy by showing that such treatment can mitigate the economic impact of AIDS. Second, they suggest that cost-benefit calculations of ARV therapy need to consider the externalities within the family that result from the increased labor supply and income-earning capacity of AIDS patients who are treated.

Many models of investment in physical and human capital show that adult longevity will influence investment decisions. My third chapter, HIV Testing and Behavioral Change (work in progress), examines the consequences of learning about HIV status (and therefore life expectancy) on investment and other forward-looking behavior. Specifically, for individuals in my survey who have gone for an HIV test, I compare pre- and post-test outcomes according to the test result. The outcomes I examine—transfers of money and goods, asset sales and purchases—are constructed from retrospective reports in the two rounds of survey data. These results provide evidence on the extent to which individual investment decisions are influenced by learning about HIV status.

Other Research in Progress:

Monitoring and evaluation of short- and long-term economic impacts of an ARV treatment program in South India (with Nalini Tarakeshwar and Michael Merson). This project evaluates the economic impacts of a large ARV treatment program in the state of Tamil Nadu. A sample of over 3,000 patients (from rural and urban HIV clinics) will be followed over the course of three years beginning in October 2005, with socio-economic surveys being administered at baseline and every six months thereafter.

Long-term impacts of AIDS treatment in western Kenya (with Markus Goldstein and Joshua Graff Zivin). This project examines the long-term socio-economic impact of ARV therapy, with a focus on outcomes such as labor supply, agricultural production, and food consumption. The analysis will be based on the continuation of the longitudinal survey in western Kenya which I began in March 2004. All households that were part of the first two rounds of the survey (in 2004 and 2005) will be revisited beginning in 2006.